Transcript Slide 1

Incentives for the
Aerospace, Shipbuilding &
Shiprepairing Industries in
Malaysia
_____________________________
Malaysian Industrial Development Authority
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Malaysian Industrial Development Authority
(MIDA)
 Established in 1967 under Act of Parliament, 1965
 The principal Malaysian Government agency
responsible for the promotion and coordination of
industrial development in the country
 First point of contact for investors who intend to set
up projects in the manufacturing and its related
services sectors in Malaysia
 On 27 March 2004, the Government has also
mandated MIDA to become the single window for
services sector
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Functions of MIDA
PLANNING
PROMOTION
• Planning for industrial development
• Foreign Direct Investment
• Recommend policies and strategies
on industrial promotion and
development
• Domestic Investment
• Cross Border Investment
• Manufacturing Related Services
FOLLOW-UP/MONITORING
• Assist companies in the
implementation and operation of
their projects
• Advisory Services
EVALUATION
• Manufacturing licences
• Tax incentives
• Expatriate posts
• Duty exemption
• RDC, IPC and R&D status
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Government Representatives based in MIDA
 Functions
Immigration Department
Royal Customs Department
Department of Occupational
Health & Safety
Department of Environment
Ministry of Finance
Ministry of Human Resource
Telekom Malaysia Berhad
Tenaga Nasional Berhad
 Advise and assist investors
on matters relating to tax,
labour, immigration,
customs, utilities,
occupational, safety, and
health, and environment
 Coordinate applications for
approval and other matters
under the purview of the
relevant ministries and
departments
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Functions
Functionsof
ofMIDA
MIDA
STATUS OF INDUSTRIES
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Background
of Aerospace
Industry
Functions
of
MIDA
Background
of Aerospace
Industry
Functions
of MIDA
• Aerospace sector in Malaysia is relatively new and
undeveloped
• Military’s requirement – supervised by the Defence
Ministry
• Civil aviation – regulated by the Department of Civil
Aviation
• The industry can be divided into 3 sectors:
1) Light Aircraft Assembly
2) Parts & Components Manufacturing
3) Repair/Overhaul/Maintenance Activities
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Current Status
Functions
Functionsof
ofMIDA
MIDA
COMPANIES IN PRODUCTION :
(Licenced/non-licenced companies)
 Parts/Components Manufacturing - 7
 Repair/Overhaul/Maintenance Activities – 28
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Aerostructure Manufacturing & Design
Functions
of
MIDA
Functions
of
MIDA
Companies In Malaysia
Composite Manufacturing:
• CTRM - Government Owned Company
• ACM - A Boeing, Hexel and Malaysian JV Company
Metal Manufacturing:
• SME AEROSPACE - Malaysian Private Company
• UPECA AEROTECH - Malaysian Private Company
• LKT ENGINEERING - Malaysian Private Company
Aerospace Design Houses:
ouses:
• CTRM EXCELNET - Government Owned Company
• AVIATION DESIGN CENTRE - Malaysian Private Company
• STRAND AEROSPACE MALAYSIA - UK Company in Malaysia
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Status ofFunctions
Shipbuilding
&
Shiprepairing
of
MIDA
Functions
of
Industry MIDA
• The shipbuilding and shiprepairing industry
includes the manufacture of ships, boats, patrol
vessels, barges, leisure crafts, yachts, hydrofoils,
hovercrafts and shiprepairing activities.
• This industry is fragmented, with majority of the
companies being small-sized shipyards
• There are six large shipyards involved in
shipbuilding & shiprepairing and metal
fabrication activities.
• The largest shipyard is capable of building
vessels up to 30,000 DWT and repairing vessels of
up to 450,000 DWT.
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Functions
of
Status (cont…)
Functions
ofMIDA
MIDA
MAJOR SHIPYARDS
• MALAYSIA MARINE AND HEAVY
ENGINEERING (MMHE)
• BOUSTEAD NAVAL SHIPYARD
• SABAH SHIPYARD
• RAMUNIAN SHIPYARD
• SASACOM SHIPYARD
• MUHIBBAH MARINE ENGINEERING
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Policies
Manufacturing Licence
Under the Industrial Coordination Act (ICA), 1975
manufacturing companies are required to apply for
manufacturing licence if:
i) shareholders fund is RM2.5 million or more; or
ii) full-time employees is 75 or more
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Policies (cont…)
 Equity Ownership
• 100% foreign equity ownership is allowed,
irrespective of the level of exports
 Repatriation of Profits
• Liberal Exchange Control Policy. Companies are
free to repatriate profits, dividends, commissions
and royalties
 Government’s Delivery System
• Special project officers in MIDA to ‘hand-hold’ and
assist investors in obtaining all necessary
approvals until they are operational
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Policies (cont…)
Expatriate posts
Automatic approval to employ any number of
expatriates required:
Companies
Foreign paid-up
capital of US$2
million and above
No.of Post
Eligible
Up to 10 posts
(including 5 key
posts)
Foreign paid-up
Up to 5 posts
capital of more than (incl. at least 1 key
US$200,000 but
post)
less than US$2mil.
Duration
• Key post-permanent
• Exec.post-10 years
• Non-exec.post-5
years
• Key post-permanent
• Exec-post – 10 years
• Non-exec.post-5
years
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INCENTIVES
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Functions
of
Incentives
Functions
ofMIDA
MIDA
The major incentives are provided under:
1) Promotion of Investments Act (PIA), 1986
2) Income Tax Act, 1967
3) Customs Act, 1967 / Sales Tax Act, 1972
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Promotion of Investments Act
(PIA), 1986
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Functions
of
Incentives
Functions
ofMIDA
MIDA
General Incentives
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Functions
of
Incentives
Functions
ofMIDA
MIDA
 Pioneer Status
• Partial/full relief from payment of income tax
• Exemption of income tax on 70% / 100%* of
statutory income for 5 years
 Investment Tax Allowance (ITA)
• 60% / 100%* of qualifying capital expenditure
incurred within 5 years deducted from
statutory income
• Deduction of 70% / 100%* of statutory income
in any one year
*
Location in Eastern Corridor/Sabah/Sarawak
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Criteria For Granting Pioneer Status / ITA
• Promoted product/activity
• Value added – at least 25%
• Managerial, Technical and Supervisory Index
- At least 15%
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Promoted products/activities
Aerospace, Shipbuilding and Shiprepairing Industries:
i) Manufacture and assembly of aircraft;
ii) Manufacture of aircraft equipment,
components, accessories or parts thereof;
iii) Manufacture of ground support equipment for
the aerospace industry;
iv) Maintenance, repair, overhaul or service (MRO)
of aircraft, aircraft components or accessories
or testing and repairing of avionics
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Incentives
Promoted products (cont…)
v) Hovercraft, leisure craft;
vi) Shipbuilding*
vii) Shiprepairing*
viii) Steel fabricated products*
ix) Engineering supporting products/activities
such as metal castings, forgings, surface
treatment, machining etc.
* promoted in Eastern Corridor/Sabah/Sarawak
only
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Incentives for High
Technology Companies
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Functions
of
Incentives
Functions
ofMIDA
MIDA
 Pioneer Status
Exemption of income tax on 100% of statutory
income for 5 years
 Investment Tax Allowance (ITA)
- 60% of qualifying capital expenditure incurred
within 5 years deducted from statutory
income.
- 100% deduction against statutory income in
any one year.
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Criteria For The Grant Of High Tech Incentives
• Local R&D expenditure to gross sale
- At least 1% on annual basis
• Science and technical graduates to total
workforce
- At least 7%
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Hi-Tech Promoted Products/Activities
 Design or development and production or assembly of:
I. Aircraft
II. Aircraft equipment, components, accessories or
parts of aircraft
 Modification and/or conversion of aircrafts
 Refurbishment or re-manufacture of aircraft equipment,
components or accessories or parts of aircrafts
 Application or production of advanced materials (e.g.
high strength composites)
 Development and production of advanced electronics
(e.g. communication equipment/avionics)
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Incentives for
Strategic Projects
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Functions
of
Incentives
Functions
ofMIDA
MIDA
 PS with tax exemption of 100% of statutory income
for 10 years
 ITA of 100% on qualifying capital expenditure
incurred within 5 years
Projects/activities eligible
- Of national importance & heavy capital
investment with long gestation period, involve
high levels of technology and are integrated,
generate extensive linkages, and have
significant impact on the economy.
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Incentives to Strengthen
Industrial Linkages
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Vendors, including SMIs, can apply for:
 PS with tax exemption of 100% of statutory
income tax for 5 years
 ITA of 60% or 100% for 5 years – to offset against
100% of statutory income
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Incentives
Customised Incentives
(Pre-Package)
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Incentives
 Special package of incentives (prepackage/customised) which could cover both
tax and non-tax incentives
 The special package granted is negotiable,
based on request of the company and the
merits of each case
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Income Tax Act, 1967
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Reinvestment Allowance
(RA)
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Functions
of
Incentives
Functions
ofMIDA
MIDA
• 60% of qualifying capital expenditure of existing
companies which incur capital expenditure for
the purpose of approved expansion
• Given for a period of 15 consecutive years from
year reinvestment is first made
• Offset against 70% / 100%* of statutory income
* Location in Eastern Corridor/Sabah/Sarawak
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Customs Act, 1967 &
Sales Tax Act, 1972
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Functions
of
Incentives
Functions
ofMIDA
MIDA
Import Duty and Sales Tax
Exemptions
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Functions
of
Incentives
Functions
ofMIDA
MIDA
(A)
Aircraft & Aircraft Parts/Components
Assembler/Manufacturer/Shipbuilding &
Shiprepairing
(i) Exemption from import duty and sales
tax on machinery/equipment/spare
parts (PC1)
(ii) Exemption from import duty & sales tax
on raw materials/components (PC2)
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Functions
of
Incentives
Functions
ofMIDA
MIDA
(B) Maintenance, Repair & Overhaul (MRO)
Activities

Blanket approval for import duty and sales
tax exemption on raw materials,
machinery, equipments, replacement parts
and consumables for MRO companies

Subject to the condition that each import
is attached with one of the ‘Certificated of
parts and components issued by the
original equipment manufacturer (OEM)’
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Functions
Functionsof
ofMIDA
MIDA
Industrial Master
Plan 3
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IMP3
Objective: To achieve long-term global industrial
competitiveness through transformation and
innovation of manufacturing and services sector
 Encompasses a 15 year period (2006 – 2020)
 Aims to improve & strengthen the country’s
global competitiveness across 3 economic
pillars;
• Manufacturing
• Agriculture and agro-based industries
• Services
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IMP 3
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
industrialisation,
with
consideration of environmental and regional
balance
•
Sustaining manufacturing sector’s
contribution to economic growth
significant
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IMP3
Strategic Thrusts:
•
Positioning services sector as major source
of growth
•
Facilitating development and application of
technologies
•
Developing innovative and creative human
capital
•
Strengthening
institutions
•
Creating competitive business operating
environment
role
of
private
sector
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