Malaysian Industrial Development Authority
UNIDO-Africa IPA Network Conference
Johannesburg, South Africa
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12-14 June 2006
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DOMESTIC
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INVESTMENT
Second level
PROMOTION
IN
Third level
MALAYSIA
Fourth level
Fifth level
Yew-Fook Phang
Director, ICT and Electrical Industries Division
Malaysian Industrial Development Authority (MIDA)
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
Malaysian Industrial Development
Authority (MIDA )
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Established in 1967 under Act of Parliament,
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Second
levelGovernment agency responsible for
• Principal
promotion and coordination of industrial
Thirdthe
level
development in the country
Fourth level
• First point of contact for investors, both
Fifthforeign
level and local, in the manufacturing and
related services sectors in Malaysia
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
Functions of MIDA
PROMOTION
PROMOTION
EVALUATION
EVALUATION
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•• Foreign
Foreigndirect
directinvestment
investment
•• Domestic
Domesticinvestment
investment
•• Cross-border
Cross-borderinvestment
investment
•• Services
Services
•• Manufacturing
Manufacturinglicences
licences
•• Tax
Taxincentives
incentives(including
(includingfor
forR&D,
R&D,
Hotel
Hoteland
andTourism,
Tourism,Training
Trainingand
and
Manufacturing
ManufacturingRelated
RelatedServices)
Services)
•• Expatriate
Expatriateposts
posts
•• Duty
Dutyexemption
exemption
•• RDC,
RDC,IPC
IPCand
andR&D
R&Dstatus
status
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• Second level
• Third level
PLANNING
FOLLOW-UP/MONITORING
PLANNING
FOLLOW-UP/MONITORING
•Planning
Fourth
leveldevelopment •• Assist
•• Planning
for
forindustrial
industrialdevelopment
Assistcompanies
companiesin
inthe
the
implementation
and
operation
•• Recommend
implementation and operationof
oftheir
their
Recommendpolicies
policiesand
andstrategies
strategies
projects
•ononindustrial
Fifth
level
projects
industrialpromotion
promotionand
and
development
development
•• Formulation
Formulationof
ofstrategies,
strategies,
programmes
and
programmes andinitiatives
initiativesfor
for
international
internationaleconomic
economiccooperation
cooperation
23 June 2006
•• Facilitate
Facilitateexchange
exchange&&co-ordination
co-ordination
among
institutions
engaged
among institutions engagedin
inor
or
connected
with
industrial
development
connected with industrial development
•• Advisory
Advisoryservices
services
www.mida.gov.my
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Malaysian Industrial Development Authority
Development Philosophy
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System of free enterprise but with active
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government support and direction.
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•Second
Government provides the broad thrusts
level
and sets
direction for the whole economy,
and level
ensures the achievements of socioThird
economic goals.
Fourth level
Fifth
levelsector is free to operate and given
• Private
appropriate policy, institutional
infrastructural support.
23 June 2006
www.mida.gov.my
and
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Malaysian Industrial Development Authority
Complementarities of FDI and
Domestic
Investments
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Malaysian Govt recognises the important role of
FDI in
economic
development.
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Second
leveltime, Malaysian Govt recognises that
• At the same
domestic firms are the backbone of the
Third
level
manufacturing
sector and their capabilities need
to be developed
through appropriate incentives.
Fourth
level
Fifth
level
• There
is a need to develop FDI and domestic
investments as complementary to one another.
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
Nurturing A Strong Network of Domestic Firms
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• Many studies suggest that a prerequisite for
technology transfer is the nurturing of a strong
network
ofedit
domestic
firms
(SMEs)
with the potential
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of serving the MNCs in supporting roles.
•• Second
level of the linkage between the MNCs
The strengthening
and local suppliers can help to increase productivity
• Third
level of domestic firms through:
and efficiency
-• Fourth
MNCs providing
level help to prospective suppliers set up
production facilities
•- Fifth
MNCSlevel
require from suppliers reliable and high
quality
products
while
providing
technical
assistance to help improve the products.
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
Domestic Investments in Malaysia
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Malaysian-owned
accounted
for 45% of
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the total value of approved investments during the
1980-2005 period.
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• A majority of these investments (60%) were in the
SME category
• Second
level involving investments of less than
US$2.8 million each, mainly in fabricated metal
products,
• Third
level machinery, furniture and fixtures,
electrical and electronics, food and transport
equipment
industries.
• Fourth
level
These
companies were supplying part and
• •Fifth
level
components to the MNCS, reflecting their
capabilities in meeting the stringent specifications
set by the MNCs, and in producing high quality
parts and components.
23 June 2006
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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This haslevel
contributed to the development of
Second
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.
23 June 2006
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
and
• components
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automotive
• manufacturers
Second level and assemblers.
Third level
•• More
than 70% of these are Malaysian• owned.
Fourth level
•
Fifth
level
• The
industry
is
now
capable
of
manufacturing a wide range of products from
engines to electronic and plastic parts.
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
Initiatives by the Government to
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increase
domestic
investments
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The high level of domestic investments
Second
level attributed to initiatives
can be
undertaken
Third
level by the Malaysian Govt to
increase
domestic investments in the
Fourth
level
manufacturing and services sectors.
Fifth level
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
INCENTIVES
• Various
were introduced
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stylethe
past Budgets such as the enhancement of
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existing
incentives
the introduction of
new incentives
to promote domestic
• Second
level
investments in specific sectors such as
• Third level
- Machinery and equipment
• Fourth
level
- Food
• Fifth
leveland tourism projects
- Hotels
- Cold chain facilities and services
23 June 2006
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
Third
levelsuppliers to MNCs/LSIs
become
Fourth
levelopportunities to increase
¾
Providing
value-added
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23 June 2006
www.mida.gov.my
SMEs to
domestic
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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.
23 June 2006
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.
23 June 2006
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
in an approved ILP
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who are capable of achieving world-class standards
in terms oflevel
price, quality and capacity, will be eligible
• Second
for the following incentives:
• Third level
- Pioneer Status with a tax exemption of 100%
• Fourth
statutorylevel
income for a period of ten years.
• Fifth level
of the
- Investment Tax Allowance of 100% on the qualifying
capital expenditure incurred within five years. This
allowance can be offset against 100% of the
statutory income for each year of assessment.
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
Other Initiatives by the Government
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to
Increase
Domestic
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Domestic Investment Seminars
Second level
Third
levelIndustry Seminars
Specific
Fourth level
Enterprise
Fifth
level Connect
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
Domestic Investment Seminars
• Provide
investors
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regionstyle
with the
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latest update on Government policies,
incentives,
andstyles
support services
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available in the country;
• Second level
• Highlight investment opportunities in the
• Third
level
manufacturing
and related services sectors;
Serve level
as a forum for the local business
•• Fourth
community to provide feedback to the
• Fifth
level on problems and current issues
Government
pertaining to investments in the country.
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
Specific Industry Seminars
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• AClick
useful to
platform
for participants
to obtain
updates from invited speakers on the latest
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styles industry and
developments
in thetext
specific
take stock
• Second
levelof global trends, issues and
challenges
• Third
level facing the industry and future
directions and opportunities.
• Fourth level
•• Fifth
Opportunities
for increased outsourcing for
level
local companies through networking with
foreign companies.
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
ENTERPRISE CONNECT
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• An online business matching service connecting
businesses worldwide.
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This web-based
facility
local companies
seeking joint-venture partners and technology
Second
level
connect with
international business partners.
Third
level
Registered members may conduct customised
searcheslevel
for business partners based on their
Fourth
specific requirements.
Fifth level
• When companies register with E-Connect, their
company details and project proposals are posted in
the E-Connect Directory free-of-charge.
23 June 2006
www.mida.gov.my
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Malaysian Industrial Development Authority
CROSS-BORDER INVESTMENTS
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• MIDA
also
Malaysian
to undertake cross-border investments,
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especially
industries
in which it is no
longer competitive.
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Second level
Various
incentives to assist and facilitate
Third
level
Malaysian companies investing overseas
Fourth
such aslevel
tax abatement on income earned
overseas and remitted back to Malaysia, tax
Fifth
level for pre-operating business
deduction
expenditure as well as tax incentives for the
acquisition of foreign companies.
23 June 2006
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
23 June 2006
www.mida.gov.my
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