TRENDS & INVESTMENT OPPORTUNITIES IN THE MANUFACTURING & SERVICES SECTOR IN MALAYSIA WORLD SME CONFERENCE 13th DECEMBER 2007

TRENDS GLOBAL MALAYSIA MALAYSIAN OPPORTUNITIES MANUFACTURING SERVICES WORLD SME CONFERENCE 13th DECEMBER 2007

TRENDS

GLOBAL

MALAYSIA

MALAYSIAN OPPORTUNITIES

MANUFACTURING

SERVICES

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.

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.

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 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 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.

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 Vision: To transform SMEs into an economic powerhouse of the country by 2020 Mission: To instill and eventually ingrain deeply the concept of “learning organisation” into SMEs and encourage them to be export-oriented

SMI Association of Malaysia

Vision:

To transform SMEs into an economic powerhouse of the country by 2020

Mission:

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.

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

Source : MITI COMPANY ACTIVIES / PRODUCTS Ji Kang Dimensi Sdn. Bhd. Steel slabs & steel billets K-Advance Sdn. Bhd. Veneer, wood chips & sawn timber Intraco Biopolymer Sdn. Bhd. Bridgeable starch resin Kejora Teguh Sdn. Bhd. Composite stainless steel/carbon steel pipes

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

Investment Policies Policy on Equity Ownership Guidelines on Repatriation of Profits

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 Interest Profits Dividends Equity Guidelines

Guidelines on Repatriation of Profits

No restriction imposed to foreign companies investing in Malaysia on:

Repatriation of capital

Interest

Profits

Dividends

Equity Guidelines

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) Key post-permanent 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) Key post-permanent Executive post – 10 years Non-Exec. post – 5 years

Key post-permanent

Executive post – 10 years

Non-Exec. post – 5 years

Key post-permanent

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. Pre-Packaged Incentives Granted based on request of the company (negotiable) and the merits of each case Major Incentives Provided

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.

Pre-Packaged Incentives

Granted based on request of the company (negotiable) and the merits of each case

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

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

Strategic Thrusts 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

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

Strategic Thrusts 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

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

Investment Targets Average Annual Investments (RM Billion) Manufacturing Services 2006 - 2020 27.5 45.8

Targeted Industries in Manufacturing Sectors Non-Resourced Based Industries Electrical and electronics Medical devices Textiles and apparel Machinery and equipment Metals Transport equipment

Non-Resourced Based Industries

Electrical and electronics

Medical devices

Textiles and apparel

Machinery and equipment

Metals

Transport equipment

Targeted Industries in Manufacturing Sectors Resourced Based Industries Petrochemicals Pharmaceuticals Rubber and rubber products Wood based products Oil palm-based industry Food processing

Resourced Based Industries

Petrochemicals

Pharmaceuticals

Rubber and rubber products

Wood based products

Oil palm-based industry

Food processing

Targeted Sub-sectors in Services Business and professional services Logistics ICT services Distributive trade Education and training Construction Health Tourism

Business and professional services

Logistics

ICT services

Distributive trade

Education and training

Construction

Health

Tourism

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

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

Cont. 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

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

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

Political & Economic Stability Pro-business Government Liberal Investment Policies Transparent Policies Policy of Welcome Well Developed Infrastructure Harmonious Industrial Relations Trainable & Educated Labour Force Quality of Life Good Track Record Why Malaysia ?

Political & Economic Stability

Pro-business Government

Liberal Investment Policies

Transparent Policies

Policy of Welcome

Well Developed Infrastructure

Harmonious Industrial Relations

Trainable & Educated

Labour Force

Quality of Life

Good Track Record

June 5, 2009 www.mida.gov.my PERFORMANCE OF MANUFACTURING AND SERVICES SECTORS 2006 GDP (RM billion) 277.3 Contribution to GDP (%) Manufacturing Services 32.0 58.2 Share of manufactured exports (%) 76.7 Share to total employment (%) Manufacturing Services 29.1 51.3

Contribution to GDP (%)

Manufacturing

Services

Share to total employment (%)

Manufacturing

Services

The International Positioning for IDR Competitive Advantage Political Stability English Speaking Proximity to Singapore Well located for geographical diversification Mega Trends Globalisation Global Supply Chains Push for Diversity High Financial Liquidity Regional Trends Tap into Growth of China & India Increased South East Asia integration (AFTA)

Competitive Advantage

Political Stability

English Speaking

Proximity to Singapore

Well located for geographical diversification

Mega Trends

Globalisation

Global Supply Chains

Push for Diversity

High Financial Liquidity

Regional Trends

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 EXISTING SECTORS Electrical and Electronics Petrochemicals and Oleo Chemicals Food and Agro Processing Logistics Services Tourism Related Services TARGETED GROWTH SECTORS Creative Industries (ICT and Multimedia) Educational Services Financial Advisory and Consulting Services Healthcare Services

EXISTING SECTORS

Electrical and Electronics

Petrochemicals and Oleo Chemicals

Food and Agro Processing

Logistics Services

Tourism Related Services

TARGETED GROWTH SECTORS

Creative Industries (ICT and Multimedia)

Educational Services

Financial Advisory and Consulting Services

Healthcare 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

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 Paddy Farming Fisheries and Aquaculture Animal Husbandry Fruit & Vegetables Herbs, Horticulture and Premium Specialty Food Commercial Crops: Rubber and Oil Palm

Promoted Sub-Sectors in NCER

Paddy Farming

Fisheries and Aquaculture

Animal Husbandry

Fruit & Vegetables

Herbs, Horticulture and Premium

Specialty Food

Commercial Crops: Rubber and Oil

Palm

PROMOTION Foreign Direct Investment Domestic Investment Cross Border Investment Business matching through Enterprise Connect Manufacturing Services PLANNING Planning for industrial development Recommend policies and strategies on industrial promotion and development Formulation of strategies, programmes and initiatives for international economic cooperation EVALUATION Manufacturing licences Tax Incentives (including for R&D, Hotel & Tourism, Training & Manufacturing related services) Expatriate posts Duty Exemption OHQ, RDC & IPC status FOLLOW-UP/MONITORING Assist companies in the implementation and operation of their projects Facilitate exchange & co-ordination among institutions engaged in or connected with industrial development Advisory Services OUR FUNCTIONS

PROMOTION

Foreign Direct Investment

Domestic Investment

Cross Border Investment

Business matching through

Enterprise Connect

Manufacturing Services

PLANNING

Planning for industrial

development

Recommend policies and

strategies on industrial promotion

and development

Formulation of strategies,

programmes and initiatives for

international economic

cooperation

EVALUATION

Manufacturing licences

Tax Incentives (including for R&D,

Hotel & Tourism, Training &

Manufacturing related services)

Expatriate posts

Duty Exemption

OHQ, RDC & IPC status

FOLLOW-UP/MONITORING

Assist companies in the

implementation and operation

of their projects

Facilitate exchange & co-ordination

among institutions engaged in or

connected with industrial

development

Advisory Services

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 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.

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.

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.

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STATE BRANCHES SELANGOR NEGERI SEMBILAN

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