Investment Incentive For Rubber Industry

MREPC REGIONAL SEMINAR Investment Incentive For Rubber Industry Present by Mr. Mohd Rasli Muda Director, Food Technology & Sustainable Resources Malaysian Investment Development Authority (MIDA)

Contents About MIDA Performance of Manufacturing Sectors Overview of Rubber Industries in Malaysia Investment Policies Quality Investment Incentives Promoted Activities Under PIA, 1986 Domestic Direct Investment (DDI) Initiatives 2

Malaysian Investment Development Authority (MIDA)

Function of MIDA Promotion Foreign Direct Investment Domestic Investment Business matching through E-Connect Manufacturing Services Evaluation Manufacturing licenses Tax incentives Expatriate posts Duty exemption OHQ, RDC, IPC and R&D status Planning Follow-up / Monitoring Planning for industrial development Recommend policies and strategies on industrial promotion and development Formulation of strategies, programmes and initiatives for international economic cooperation 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 4

One Stop Centre Based In MIDA Immigration Department Telekom Malaysia Berhad Royal Malaysian Customs Labour Department Tenaga Nasional Berhad Based outside of MIDA Department of Occupational Safety and Health Ministry of Finance Multimedia Development Corp. (MDeC) Construction Industry Development Board of Malaysia (CIDB) Ministry of Health Department of Environment (DOE) Ministry of Tourism Ministry of Higher Education Ministry of Human Resource 5

MIDA Regional & Worldwide Network Borneo Island -Kuching -Kota Kinabalu -12 Regional Offices -23 Oversea Centers 6

Performance of Manufacturing Sector

Manufacturing Sector Year No. of projects No. of employment Proposed investment (RM Billion) Domestic Foreign Total 2010 910 97,319 18.1 29.1 47.2 2011 846 100,533 21.9 34.1 56 2012 804 76,631 20.2 20.8 41 Source: MIDA 8

Project Approved By Major Industry As At 2012 Number of Projects Total Investment (RM million) Transport Equipment 85 7,800 Chemicals & Chemical Products 73 6,400 Petroleum Products 14 6,000 Electronics & Electrical Products 112 4,000 Basic Metal Products 37 3,800 Food Manufacturing 67 3,400 Machinery Equipment 84 1,850 Rubber Products 20 1,350 Industry Source: MIDA 9

Approved Project for Rubber Industry Year Proposed Investment (RM million) No. of Projects Domestic Foreign Total 2010 17 94.7 47.6 142.3 2011 19 538.3 91.2 629.5 2012 20 132 1,218 1,350 2013 (Jan – Oct) 14 932.8 58.2 991.0 Source: MIDA 10

Overview of Rubber Industry In Malaysia

Rubber Industries In Malaysia Latex Products Tyres and TyreRelated products Industrial and General Rubber Productsucts 12

Overview of Rubber Industries In Malaysia Latex Products 125 manufacturers producing gloves, condoms, catheters, latex thread and others. Contribute 81% of the rubber total value of exports Condoms, surgical gloves, examination gloves and catheters are classified as medical gloves Malaysia as world’s leading producer and exporter of catheters, latex thread and natural rubber medical gloves Major companies producing latex product Top Glove Sdn. Bhd. (Malaysia) Hartalega Sdn. Bhd. (Malaysia) Supermax Corporation Berhad (Malaysia) 13

Overview of Rubber Industries In Malaysia Tyres and Tyre-related Products 120 Companies – 12 tyre producers and remaining companies produce tyre retreads, inner tubes and other accessories Major Tyre producers : Continental Sime Tyre AS Sdn. Bhd (Germany) Continental Sime Tyre PJ Sdn. Bhd. (Germany) Silverstone Berhad (Japan) Goodyear Malaysia Berhad (USA) Toyo Tyre Manufacturing (M) Sdn. Bhd (Japan) 14

Overview of Rubber Industries In Malaysia Industrial and General Rubber Products 184 Companies producing wide range of rubber products : Beltings Hoses Tubings Seals and sheeting for automotive Electrical & electronics Machinery & equipment Construction industries 15

Overview of Rubber Industries In Malaysia Note: *other rubber: Synthetic Rubber, Reclaim Rubber, Waste Rubber , Compound Rubber and Unvulcanised Rubber (HD Code 4002-4006 **Jan – June Sumber : Jabatan Statistik, Malaysia 16

Investment Policies

Investment Policies Foreign Equity 18

Manufacturing License Shareholders’ funds of RM2.5 million Engaging 75 full-time employees 19

Employment of Expatriate Personnel Companies Foreign paid-up capital of US 2 million and above Foreign paid-up capital of more than US 200,000 but less than US 2mil. No. of Post Eligible Up to 10 posts (including 5 key posts) Up to 5 posts (including at least 1 key post) Duration Key postpermanent Exec.post10 years Non-exec.post5 years 20

Quality Investment

Quality Investment Element - High value added - High technology - Knowledge intensive - Skills-intensive Objective Strong Multiplier Effects Generate Growth of Domestic Companies Cluster Development Local Sourcing Strengthening of R&D Activities Human Capital High Income Nation by 2020 22

Incentives

Major Incentives 1. PIONEER STATUS Income Tax Exemption, 70% from Statutory Income for a period of 5 years Income Tax Exemption, 100% from Statutory Income for a period of 10 years 24

Major Incentives 2. INVESTMENT TAX ALLOWANCE Allowance of 60% on Qualifying Capital Expenditure (excluding land), incurred for a period of 5 years This allowance can be offset against 70% of the statutory income for each year of assessment. Allowance of 60% on Qualifying Capital Expenditure (excluding land), incurred for a period of 5 years This allowance can be offset against 100% of the statutory income for each year of assessment. 25

Other Incentives 1. Small-Scale 60% Malaysian-owned. Pioneer Status - 100% tax exemption for 5 years. Investments Tax Allowance - 60% on Qualifying Capital Expenditure incurred for a period of 5 years. It can be offset against 100% of the statutory income for each year of assessment. Note: Definition of Small-Scale - Companies incorporated in Malaysia with shareholders’ fund not exceeding Rm2.5 million. 26

Incentives of Small Scale Companies Eligibility Criteria: Malaysian equity ownership: Companies with shareholders’ fund of up to RM500,000 with at least 60% Malaysian equity Companies with shareholders’ fund of above RM500,000 and less than RM2.5 million with 100% Malaysian equity. Applications must fulfill the following conditions: Value Added (VA) – 25% Managerial, Technical and Supervisory Staff (MTS) index – 20% Not more than 20% of the equity of the applicant company is owned, whether directly or indirectly controlled, by a holding company having shareholders’ funds of more than RM2.5 million. Producing products/engaged in activities listed in the list of promoted products/activities for small companies or general promoted list. 27

Other Incentives Reinvestment in ResourceBased Industries Another round of Pioneer Status or Investment Tax Allowance Incentives 51% Malaysian-owned Reinvestment in Expansion projects in Rubber, Oil Palm and Wood-Based Industries Product which have export potential 28

Promoted Activities Under PIA 1986

List of Promoted Products/Activities (General) Manufacture of Rubber Products Tyre for earthmover, agricultural vehicles, industries vehicles, commercial vehicles, motorcycle and aircraft. Latex products such as safety or special function gloves. Dry rubber products such as belting, hoses, pipes, tubings, rubber profiles, seals, gaskets, washers, packings, rings, rubber linings, anti vibration, damping and sound insulations. Manufacturing Related Services Enviromnment management – reclaimed rubber 30

Promoted Activities Under PIA 1986 Small Scale Manufacture of rubber Products such as:(a) Moulded rubber products (b) Extruded rubber products (c) General rubber products 31

Indirect Incentives Import Duty/Sales Tax Exemption on: -Machinery, Equipment, Spare Parts & Consumables -Raw Materials & Components 32

Domestic Direct Investment Initiatives

Domestic Investment Strategic Fund (DISF) Domestic Investment Strategic Fund of RM 1 billion To accelerate the shift of Malaysian-owned companies in targeted industries to high value-added, high technology, knowledge-intensive and innovation-based industries To be granted under the Customized Incentives Scheme on a negotiable basis based on the request of the companies and the merits of each case. 34

Domestic Investment Strategic Fund (DISF) Matching grants (1:1) on reimbursable basis Eligibility Criteria: Manufacturing and services companies with Malaysian equity ownership of at least 60% Priority Sectors : Aerospace Medical Devices Pharmaceuticals Advanced Electronics Machinery and Equipment Renewable Energy Services including design, R&D, testing, quality and standard certification, engineering services, technical and skills training and logistics service providers Other industries, on case by case basis 35

Domestic Investment Strategic Fund (DISF) Scope of the Fund: Training of Malaysians R&D activities carried out in Malaysia Obtaining international standards / certification Licensing of purchase of the new / high technology Modernisation and upgrading of facilities and tools to undertake manufacturing or services activities for Multinational Corporations (MNCs) and Malaysian conglomerates (outsourcing activities) 36

Incentive for Acquiring a Foreign Company for High Technology Reintroduction of the incentive for acquisition of foreign companies Malaysian-owned company acquiring a foreign-owned company abroad will be eligible for an annual deduction of 20% of the acquisition cost for 5 years. Purpose of acquisition: Establishment of a manufacturing facility/company or services company within Malaysia Utilisation of the acquired technology in their existing operations within Malaysia 37

Incentive for Acquiring a Foreign Company for High Technology Eligibility Criteria: At least 60% Malaysian equity ownership For public listed company: At least 60% of its equity is directly owned by Malaysians on the first day of listing on the stock exchange; and At least 50% of its equity is directly owned by Malaysians Acquisition of the foreign technology company must result in increase of performance or enhancement of technology and processes of the company’s operation in Malaysia Definition of High Technology: New and emerging technologies; or Relatively new technology for the industry / sector concerned 38

THANK YOU MALAYSIAN INVESTMENT DEVELOPMENT AUTHORITY www.mida.gov.my

Tyre for earthmover, agricultural vehicles, industries vehicles, commercial vehicles, motorcycle and aircraft. Latex products such as safety or special function gloves. Dry rubber products such as belting, hoses, pipes, tubings, rubber profiles, seals, gaskets, washers, packings, rings, rubber linings, anti vibration, damping and sound