Trends & Investment Opportunities In The Manufacturing & Services Sector In MalaysiaPresentation Transcript
TRENDS & INVESTMENT OPPORTUNITIES IN THE MANUFACTURING & SERVICES SECTOR IN MALAYSIA WORLD SME CONFERENCE 13th DECEMBER 2007
WORLD SME CONFERENCE 13th DECEMBER 2007
MALAYSIA INTERNATIONAL TRADE & INDUSTRY’S AGENCIES
Small and Medium Enterprises (SMEs) are increasingly becoming the backbone of the Malaysian economy as well as that of many other developing countries.
If a nation wants to achieve sustainable economic growth, developing a group of diverse and competitive SMEs is the way to go in future, as evidenced by the experience of the developed countries of the world.
SMEs have become a force to be reckoned with, both locally and globally. According to the 2005 Census of Establishment and Enterprise, a whopping 99.2% of Malaysian business establishments is made up of SMEs, of which about 80% are micro enterprises.
The census results further showed that SMEs are a major source of employment, providing jobs for over 5.6 million workers, which accounts for 56% of total employment, and contributed 32% of the country’s gross domestic product (GDP).
The Malaysian Government has extended substantial support to domestic SMEs by pursuing policies, initiatives and programs that focus on strengthening the enabling business infrastructure, building the business capacity of SMEs and enhancing access to financing.
The SMI Association of Malaysia was established in 1995 to promote and provide support to Small and Medium industries, enterprises and businesses in Malaysia to nurture growth.
It does so by organizing large-scale conferences, exhibitions, awards, road shows and trade missions, among others.
It also engages itself with dialogues with the relevant authorities in Malaysia to provide feedback to initiate better avenues, facilities and infrastructure for SMEs to grow their businesses and ensure their sustainability.
SMI Association of Malaysia
To transform SMEs into an economic powerhouse of the country by 2020
To instill and eventually ingrain deeply the concept of “learning organisation” into SMEs and encourage them to be export-oriented
Objectives of SMI Association of Malaysia
1) To advocate the interests and needs of the small medium scale industries in Malaysia.
To help promote and develop SMEs in Malaysia.
To organise SMEs into a more cohesive group with a greater voice.
To improve the efficiency, effectiveness, productivity and performance of SMEs through a series of well-planned resources development programmes and road shows.
MALAYSIAN ECONOMY GDP Growth 5.7 % ( *2nd quarter 2007) Per Capita Income US$5,388 Inflation 2.5% Unemployment 3.5% Trade Surplus US$30.9 billion ( *June 07) International Reserves US$96.8 billion ( *30 Aug 07) Manufactured Exports to 80.8% Total Exports Malaysia is the 19th largest trading nation in the world Source: Bank Negara /Economic Report 2006/2007, Ministry of Finance
MALAYSIA’S GROSS DOMESTIC PRODUCT IN 2006 Services 58% Manufacturing 31.7% Agriculture 7.9% Mining 6.6% Construction 2.5%
Contribution of the Manufacturing Sector to the GDP (2001 – 2006)
of the Manufacturing & Services Sector PERFORMANCE
Source : MITI TOTAL APPROVED MANUFACTURING PROJECTS 2006 –2007 (Jan-Sept) Year No. of projects Approved Investments (US$ billion) Domestic Foreign Total 2006 1,077 7.0 5.5 12.5 2007 (Jan-Sept) 702 5.1 6.2 11.3 Total 1,779 12.1 11.7 23.8
Approved Investments In The Manufacturing Sector by Major Country 2006 – September 2007 Country No. Of Projects Potential Employment Approved Investments (US$Million) Japan 123 16,784 2,823 Netherlands 17 6505 1,360 Singapore 213 21,645 1,240 USA 61 6672 1,005 Germany 37 5164 568 United Kingdom 32 1955 266 China 29 2138 50
Approved Investments In The Manufacturing Sector by Major Industry 2006 – September 2007 Country No. Of Projects Potential Employment Domestic Investment (US$Million) Foreign Investment (US$Million) Electrical & Electronic Products 286 51,002 748 5,269 Chemicals & Chemical Products 209 8,276 2,216 1,376 Plastic Products 148 10,595 208 336 Machinery Manufacturing 174 7,427 287 290 Rubber Products 59 7,493 184 213 Fabricated Metal Products 192 8,456 247 182 Transport Equipment 102 7,754 496 143
Source : MITI TOTAL IMPLEMENTED MANUFACTURING PROJECTS ( As at 31 December 2006) No. of projects Implemented Investments (USD billion) Domestic Foreign Total 13,808 38.0 42.8 80.8
FOREIGN INVESTMENT IN MANUFACTURING PROJECTS IMPLEMENTED BY MAJOR COUNTRY ( as at 31 Dec 2006 ) Country No of Projects Total Investments (USD bil) Japan 2,155 10.5 USA 601 9.3 Singapore 2,292 4.4 Taiwan 1,397 4.3 Germany 278 3.3 Netherlands 125 2.4 Korea 252 1.6 United Kingdom 327 1.02 Hong Kong 388 562 mil Switzerland 95 502 mil
MANUFACTURING PROJECTS IMPLEMENTED WITH FOREIGN PARTICIPATION BY MAJOR INDUSTRY, (as at 31 Dec 2006)
Manufacturing Projects Approved With Participation From China, 2006 - September 2007 Source : MITI No of Projects Total Investment (US$) 29 50.2 million
Manufacturing Projects Implemented With Participation From China ( as at 31 Dec 2006 ) Source : MITI No of Projects Total Investment (US$) 70 138.8 million
Projects Implemented With Participation From China By Major Industry, As At December 2006 Source : MITI Industry Total Investments (US$ Million) Basic Metal Products 73.6 Rubber Products 12.5 Wood & Wood Products 11.4 Chemical & Chemical Products 9.8 Transport Equipment 8.9 Plastic Products 7.9 Electronics & Electrical Products 4.4 Machinery & Equipment 4.0
Major Implemented Manufacturing Projects with Participation From China, (as at December 2006) COMPANY ACTIVIES / PRODUCTS Rexpak Sdn. Bhd. Thermoformed plastic containers Asia Star Printing Equipment (M) Sdn. Bhd. Offset printing plates (recycled & new) Nippon Motor Assemblers Sdn. Bhd. Manufacture of motorcycles & scooters (125cc & above) Tatt Win Rubber Industries Sdn. Bhd. Rubber compound Chee Kuang Ceramic Trading Sdn. Bhd. Ceramic tiles
of the Manufacturing Related Services Sector PERFORMANCE
INVESTMENTS IN APPROVED SERVICES ACTIVITIES (As at September 2007) Source: MITI Type of Establishment No. of Approvals Estimated Annual Business Spending (USD million) Operational Headquarters 145 410.68 International Procurement Centres 201 1,393.52 Regional Distribution Centres 17 74.63 Regional Offices 624 NA Representatives Offices 1,402 NA TOTAL 2,389 1,878.83
Policy on Equity Ownership
Guidelines on Repatriation of Profits
100% foreign equity ownership is allowed, irrespective of the level of exports
Guidelines on Repatriation of Profits
No restriction imposed to foreign companies investing in Malaysia on:
Repatriation of capital
Liberalisation on Employment of Expatriates Companies with No. of Post Eligible Duration Foreign paid-up capital of US$ 2 million and above Up to 10 posts (incl. 5 key posts)
Executive post – 10 years
Non-Exec. post – 5 years
Foreign paid-up capital > US$200K but <US$ 2 mil. Up to 5 posts (Incl. at least 1 key posts)
Executive post – 10 years
Non-Exec. post – 5 years
for the Manufacturing Sector Incentives
Pioneer Status (PS)
Income tax exemption, ranging from 70% to 100% of statutory income for a period of 5 to 10 years.
Investment Tax Allowance (ITA)
ITA of 60% to 100% on qualifying capital expenditure incurred for a period of 5 to 10 years.
Reinvestment Allowance (RA)
Granted for 15 consecutive years commencing from the 1st year the investment is made.
Granted based on request of the company (negotiable) and the merits of each case
Major Incentives Provided
Import Duty and Sales Tax Exemptions
Exemption from Import Duty on Raw Materials/Components
Exemption from Import Duty and Sales Tax on Machinery and Equipment
Third Industrial Master Plan (2006-2020)
Malaysia – Towards Global Competitiveness
Strengthening Malaysia’s position as major global trading nation
Generating investments in targeted growth areas
Integrating Malaysian companies into regional and global networks
Ensuring sustainable industrialization, with consideration of environmental and regional balance
Sustaining manufacturing sector’s significant contribution to economic growth
Positioning services sector as major source of growth
Facilitating development and application of technologies
Developing innovative and creative human capital
Strengthening role of private sector institutions
Creating competitive business operating environment
Measures Taken To Enhance Malaysia’s Competitiveness
Reduction in Corporate Income Tax- 26% in
2008 and 25% in 2009
Enhancing the Effectiveness of the Public
Delivery System (PEMUDAH)
Establishment of the Cabinet Committee on High Impact Projects
Establishment of Immigration Offices in all
relevant government agencies
Abolishment of the Real Property Gains Tax ( effective 1 April 2007 )
Establishment of the Malaysian Logistics
Council and the Malaysian Services Development Council
14 th PREFERRED DESTINATION FOR FDI – UNCTAD 2007
26 th MOST COMPETITIVE ECONOMY IN THE WORLD & 9 th MOST COMPETITIVE COUNTRY FOR BUSINESS EFFICIENCY
World Economic Forum 2007
TOP 3 ATTRACTIVE LOCATION FOR OFFSHORING & OUTSOURCING SERVICES
A.T. Kearney’s- Annual Global Services Location Index
(in 2005, 2006 and 2007)
12 th RANK GLOBALLY FOR CAPITAL ACCESS
Milken Institute, USA- Capital Access Index (CAI) 2006
3 rd CHEAPEST CITY IN THE WORLD FOR RENT OF PRIME OFFICE SPACE
King Sturge, UK- Global Industrial and Office Rents Survey 2006
MALAYSIA’S COMPETITIVENESS RANKING
Political & Economic Stability
Liberal Investment Policies
Policy of Welcome
Well Developed Infrastructure
Harmonious Industrial Relations
Trainable & Educated
Quality of Life
Good Track Record
Why Malaysia ?
June 5, 2009 www.mida.gov.my PERFORMANCE OF MANUFACTURING AND SERVICES SECTORS 2006 GDP (RM billion) 277.3
Contribution to GDP (%)
32.0 58.2 Share of manufactured exports (%) 76.7
Share to total employment (%)
The International Positioning for IDR
Proximity to Singapore
Well located for geographical diversification
Global Supply Chains
Push for Diversity
High Financial Liquidity
Tap into Growth of China & India
Increased South East Asia integration (AFTA)
Fast Facts on IDR
Opportunities for Arbitrage ** Detached house / Bungalow – Land Only **
Present and Future Structure of South Johor Economic Region (SJER) Economy
Electrical and Electronics
Petrochemicals and Oleo Chemicals
Food and Agro Processing
Tourism Related Services
TARGETED GROWTH SECTORS
Creative Industries (ICT and Multimedia)
Financial Advisory and Consulting Services
Incentives Offered- IDR for Priority Sectors
Exemption from the Foreign Investment Committee Rules;
Freedom to source capital globally;
Employment of expatriates;
Exemption from corporate tax for a period of
10 years ( commence operations before end of 2015) and
Exemption from withholding tax on royalty and technical fee payments to non- residents for a period of 10 years
Northern Corridor Economic Region The Northern Corridor Economic Region development programme is a Government initiative to accelerate economic growth and elevate income levels in the north of Peninsular Malaysia – encompassing the states of Perlis , Kedah , Pulau Pinang and the north of Perak . * The NCER initiative will span from 2007 to the end of the 12th Malaysia Plan period, i.e. 2025.
Northern Corridor Economic Region
Promoted Sub-Sectors in NCER
Fisheries and Aquaculture
Fruit & Vegetables
Herbs, Horticulture and Premium
Commercial Crops: Rubber and Oil
Foreign Direct Investment
Cross Border Investment
Business matching through
Planning for industrial
Recommend policies and
strategies on industrial promotion
Formulation of strategies,
programmes and initiatives for
Tax Incentives (including for R&D,
Hotel & Tourism, Training &
Manufacturing related services)
OHQ, RDC & IPC status
Assist companies in the
implementation and operation
of their projects
Facilitate exchange & co-ordination
among institutions engaged in or
connected with industrial
The SME International Trade Fair 2008, organized by the
SMI Association of Malaysia ,
is all set to propel local Small and Medium-scale Industries, Enterprises and Businesses in Malaysia into global arena.
The inaugural trade fair, which is to be made an annual event of SMI Association of Malaysia, is an open invitation to all SMEs and SMIs in Malaysia as well as the fast-growing ASEAN region to join forces and share access to the expertise and resources throughout the region.
Taking into account such important facts and figures, the SME International Trade Fair 2008 is indeed a relevant platform for local and regional SMEs to showcase their products and services, to grow together on a regional as well as global basis for the benefit of all.