Investment in Malaysia
Thriving Special Economic Zones
Golden Investment Opportunities
Many people dream of living abroad, and Malaysia, nestled within Asian territory, gives the general impression that it is rich in natural resources and gorgeous scenery. It is ideal for sightseeing and settling down. Along with its stable political and economic situation, it is also very suitable for investing in real estate. In recent years, the Ministry of Tourism in Malaysia has been actively seeking for foreigners to invest in Malaysia. Local tourism operators and housing developers have combined their efforts to establish the Malaysia My Second Home Programme (MM2H) to fulfil the dream of having a modern holiday villa for foreigners.
Malaysia has a vast hinterland, a population of about 29 million and it is a multi-racial and multi-cultural country. Malaysia has several famous islands, tropical rain forests, and a food and shopping paradise. Coupled with a well-developed transportation system and low cost, it attracts countless tourists for vacation and shopping every year. It also has a pleasant climate and is an ideal place for foreigners to study, settle, or even have long-term investments and enjoy their retirement. In addition to the abundant tourism resources, Malaysia has a young and growing population. It is also a net exporter of oil and natural gas as well as the third largest producer of palm oil and rubber in the world. To top off, it has a smooth-running financial system.
From the many elements above, it is worthy to look at Malaysia’s investment prospects.
More importantly, the Malaysian government is working extremely hard to promote plans and programmes for national economic transformation to enhance the living standard of its people and to lead the nation to become a developed country. A glimpse of the government’s efforts can be seen from their plans to create special economic zones since 2005.
At present, the government has established five economic growth corridors, including Iskandar Malaysia in Southern Johor (IRDA), East Coast Economic Region (ECER), Northern Corridor Economic Region (NCER) and Sarawak Corridor of Renewable Energy (SCORE), as well as Sabah Development Corridor (SDC).
Iskandar Malaysia in Southern Johor (IRDA)
This region is developed with the combination of land in Malaysia and the technology from Singapore. Iskandar Malaysia was established in 2006 and inspired the people of both nations to revive their countries’ economies. The Time, magazine stated that Iskandar Malaysia helped to “reshape regional economy”.
According to the latest update, as of July this year, Iskandar Malaysia has successfully attracted up to US$ 28 billion (RM 84 billion) worth of investments commitments, with actual funds of up to US$ 12 billion (RM 36 billion).
Iskandar Malaysia is located at the southernmost tip of Malaysia with an area equivalent to approximately three times the size of Singapore. Both Malaysia and Singapore are working intimately to develop the area to revitalize the economy the region. The local government will integrate existing towns, seaports and airports with new structures, and built theme parks (the first Legoland in Asia is now opened and a Hello Kitty Theme Park is coming soon), international schools, hotels, hospitals and commercial areas. Thus far, multinational companies such as Seagate, Foxconn, Flextronics, and Halliburton have established ffice in the zone as an important part of the global manufacturing network.
One of the main reasons for the strong development in Iskandar Malaysia is its strategically geographical advantages. It is adjacent to three important ports across the Straits of Malacca and the South China Sea, placing in right at the fulcrum of the global trade network. The three famous ports are the Tanjung Pelepas, Pasir Gudang and Tanjung Langsat.
East Coast Economic Region (ECER)
This economic region comprises of a new type of tourist town, four ports, two airports and a few economic development zones, covering an area of over 1,400 hectares and will become Malaysia’s first integrated Special Economic Zone.
The East Coast Economic Region has identified five areas of economic growth, specifically for tourism, natural gas and petrochemical industry, manufacturing, agriculture and education.
Following the establishment of the China-ASEAN Free Trade Area, there is now a larger market for the East Coast Economic Region. Today, the East Coast Economic Region Development Council is actively trying to promote the Kuantan Industrial Park to China.
The Kuantan Industrial Park has a total land area of 1,500 acres, and was proposed by the Malaysia Prime Minister Dato’ Seri Najib to China Premier H.E. Wen Jiabao, to become a sister industrial park of the Qinzhou Industrial Park in China.
Northern Corridor Economic Region (NCER)
The Malaysian Government promoted the development of this special economic zone which consists of four states, Perlis, Kedah, Penang and Perak, as the centre of logistics, food processing and tourism.
The authorities plan to invest US$ 59 billion (RM 177 billion) in the next 18 years, to narrow the gap among the four northern states and the national per capita income by 2025. The American independent distributors of electronic parts and components, World Micro, entered the Northern Corridor Special Economic Region to set up its first overseas base. According to official estimates, the amount of import and export of electronic and electrical products in Malaysia last year amounted to US$ 145.3 billion (RM 436.1 billion), of which 50% came from the Northern Corridor Economic Region.
Sarawak Corridor of Renewable Energy (SCORE)
This region covers area of about 70,000 square kilometres. It is approximately 320 kilometres from Tanjung Manis in Sarikei to the coastal Similajau in Bintulu, and extends to the surrounding areas and hinterland. The core development of this corridor is energy resources, especially hydropower, coal and natural gas.
In addition, the local authorities have also focused on ten industrial developments, including petroleum basic industry, aluminium smelting, iron and steel basic industries, glass industry, tourism industry, oil palm industry, logging industry, animal husbandry, fisheries and mariculture industry. In the past two years, it has been successful in attracting investments of up to US$ 10.6 billion (RM 32 billion).
Sabah Development Corridor (SDC)
The SDC will be implemented over a period of 18 years from 2008 to 2025. The key strengths of the SDC are the state’s strategic location, abundant natural resources, rich cultural heritage and access to mega biodiversity resources.
Higher value-added activities are generated through downstream processing of Sabah’s rich primary commodities and natural resources, such as oil and gas, palm oil, rubber, cocoa, herbal resources and fisheries. This can be done by promoting investments in oleo-chemicals, gas processing plants, agro-industry and others.
The four sectors that have been earmarked as the drivers of growth in the SDC are tourism, logistics, agriculture and manufacturing.
Investment incentives in Malaysia
According to the “Doing Business 2012” report published by the World Bank, Malaysia has moved up five notches to 18th place out of 183 economied around the world for the ease of doing business, ahead of developed economies such as Germany, Japan, Taiwan and Switzerland.
Malaysia’s foreign investment incentives profile:
Preferential policies framework -
The related authorities will perform comprehensive assessment individually to decide which cases are qualified for the incentive under the preferential policies framework.
These policies are generally manifested in the form of direct or indirect tax deductions.
The policies include:
- Incentives for companies with pioneer status: Companies granted pioneer status industries will receive partial income tax exemption; only 30% of their statutory income will be subjected to tax as well as a five-year tax holiday.
- Investment tax allowance: Companies that are eligible enjoy investment tax allowance of 60% on its qualifying capital expenditure within five years from the date the first qualifying capital expenditure is incurred.
Malaysian regulations on foreign investment –
- Direct investment in the establishment of the enterprise: Foreign investors are able to make direct investments in Malaysia to set up various kinds of enterprises. Direct investments include cash investment, shares acquisition, technical cooperation, concessions.
- Multinational mergers and acquisition: Malaysia allows foreign acquisitions of shares of locally-registered enterprises, as well as mergers and acquisitions of local businesses, but there are limits in foreign equity ownership in some areas. Manufacturing, mining and Multimedia Super Corridor companies and among those that can be 100% owned by foreigners.
- Stock acquisition: The Malaysian stock market is open to foreign investors, allowing foreign companies or investors to acquire locally-listed companies, subject to the consent of the Malaysian Foreign Investment Committee (FIC). Acquisition of shares listed in the Kuala Lumpur Stock Exchange that are less than 5% of the listed company shares will not need to be reported to the Securities Commission; if acquisition amounts to more than 5% of the shares of listed companies, the Securities Commission will need to be notified. Acquisitions of up to or exceeding 33.3% of the shares of a listed company will be subject to the consent of the Securities Commission, while other company shareholders will also need to be informed of the situation.
(The above information is for reference only, please contact those relevant ministries for further informations.)
Overview of Malaysia
Land area : 330,257 square kilometres
Total Population : 29,495,640 (as at 2012)
Currency Name : Ringgit Malaysia (RM)
Official language : Malay is the national language, but English and Chinese are also commonly used.
Major religions : Islam is the national religion; other religions include Buddhism, Hinduism and Christianity.
Climate : A tropical climate, average annual temperature of inland mountainous regions is 22-28℃, the coastal plains 25-30℃; the year is divided into rainy and dry seasons.