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INVESTMENT POLICIES & INCENTIVES FOR PLASTICS INDUSTRY IN MALAYSIA

By:

Umarani Muniandy

Chemical and Advanced Materials Division

Conference on Future of Innovation for Plastics Industry on 1st October 2015

PRESENTATION OUTLINE

CONTACT US

INVESTMENT POLICIES

INCENTIVES: • MAIN INCENTIVES • NEW INCENTIVES UNDER BUDGET

2015

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PLASTICS INDUSTRY IN MALAYSIA

PLASTICS INDUSTRY

IN MALAYSIA

RM million

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WORLD

PLASTICS

MATERIALS

PRODUCTION

2012

Plastics Industry Sub-sectors In Malaysia

CONSUMER & INDUSTRIAL PRODUCTS

E&E AND AUTOMOTIVE COMPONENTS

PACKAGING OTHERS

Source: Malaysian Plastics Manufacturer Association

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FEEDSTOCK & BASIC BUILDING BLOCKS

RESINS USER RECYCLING

Consist of petroleum crude oil and natural gas

Such as PE, PP, PVC, PS, ABS, PA, SAN and PBT

Packaging, specialised plastic, E&E and automotive

components

Pallet & secondary plastic products

COMPANIES IN OPERATION

Plastics Industry Ecosystem

Enablers

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PETRONAS’ Pengerang Integrated Complex (PIC) development

comprises the Refinery and Petrochemical Integrated

Development (RAPID) Complex and its associated facilities.

As at June 2015, MIDA approved RM39.7 billion worth of

petrochemical plants’ manufacturing licenses in relation to the

project. The PIC is expected to begin its operation by 2019.

PETRONAS remains fully committed to the project that has

received its Final Investment Decision (FID) and the project is

currently progressing well.

PETRONAS RAPID

• Liquefied Petroleum Gas, Naphtha, Gasoline, Jet Fuel, Diesel, Slurry/Fuel Oil

• Hydrogen

• Syngas

• Propylene

• Ethylene

• Butadiene

• Methyl Tertiary Butyl Ether (MTBE)

• Raffinate 2

• Methanol

• Phenol

• Bisphenol A

• Polycarbonate

• Ethylene Glycol

• Linear Low Density Polyethylene (LLDPE)

• Low Density Polyethylene (LDPE)

• Ethylene Vinyl Acetate (EVA)

• Polypropylene (PP)

• Mono Ethylene Glycol

• Di Ethylene Glycol

• Tri Ethylene Glycol

• Butadiene Rubber

• Styrene Butadiene Rubber

• Ethylene Propylene Non Conjugated Diene Rubber (EPDM)

Some Potential Products from RAPID

RM million

1,076

635

770 780

665

1,109

848 884

0

200

400

600

800

1,000

1,200

2007 2008 2009 2010 2011 2012 2013 2014

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Approved Investments In Plastics Industry In Malaysia (2007- 2014)

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Domestic Investment : RM755.2 Million

Foreign Investment : RM129.2 Million

4,278 Job Opportunities

51 Projects

RM884.4 Million

Approved Projects In Plastics Industry 2014

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Approved Projects In Plastics Industry 1H- 2015

RM591 million

76.5 : 23.5 Domestic-Foreign investment ratio

26 Projects

Approved

2,290 Employment opportunities

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Major Investments o Scientex Great Wall Sdn. Bhd. o Top A Plastic Sdn.Bhd. o BERICAP Malaysia Sdn. Bhd. o CLPG Packaging Industries Sdn.Bhd. o Klife Global Sdn. Bhd. o EG Operations Sdn. Bhd.

Note: Further details of Investment Performance is available at MIDA website http://www.mida.gov.my/home/facts-and-figures/posts/

INVESTMENT POLICIES

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Promote the entire value chain of industry clusters

Strengthen & complete the ecosystem

Ecosystem Approach

Quality Investment (FDI & DDI)

Strong Linkages with Domestic Industries

Completing the ecosystem

Capital Intensive

High Value Added

Utilization of natural resources

Green & Clean Technology

Skills Intensive

High Income Jobs

Iconic/ Pioneer Project

High Technology & Knowledge

Intensive

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Quality Investment

High technology, capital intensive & knowledge driven industries:

Industries manufacturing intermediate goods:

Resourced-based industries:

• Alternative Energy Sources

• Biotechnology

• Advanced materials

• Advanced electronics

• Optics and photonics

• Petrochemicals

• Pharmaceuticals

• Medical devices

• ICT

• Aerospace

• Oil & Gas • Food & Agro based • Value-added products from natural resources

• Machinery & equipment • Components & parts • Moulds and dies

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Targeted Sectors In Manufacturing

• Principal Hubs

• Business and professional services

• Logistics

• ICT services

• Offshore and outsourcing activities

• Distributive trade

• Education and training

• Healthcare

• Tourism

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Targeted Sectors In Services

The Industrial Coordination Act 1975 requires manufacturing companies with shareholders’ funds of RM2.5 million and above or engaging 75 or more full time paid employees to apply for a manufacturing license (ML). ML application will be processed by MIDA.

Guidelines on Manufacturing License

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Investment Policies

Repatriation of Funds

Foreign Equity

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Investment Policies

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Investment Policies

Guidelines on

• The consideration of expatriate posts will be based on the company’s requirement and merits of the case.

• The company must submit the following documents before the expatriate post can be considered:

SSM ML and/or Incentive Business Licence

• Minimum basic salary of RM5,000 (term-post).

• The approval will be automatically cancelled if the company failed to fill-in the approved expatriate post within 1 year from the date of approval.

MAIN & NEW

INCENTIVES

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•Manufacture of plastic products such as:-

• Specialised plastic films or sheets

• Geosystem products

• Engineering plastic products

• Products moulded under clean room conditions

• Biopolymers or products thereof

• Manufacturing related services – Recycling of waste such as:

• Toxic & non toxic waste

• Biodegradable disposable packaging products and household wares

GENERAL LIST

•Development and manufacture of polymers and biopolymers

HIGH TECHNOLOGY

•Manufacture of plastic products such as:-

• Decorative panels & ornaments

• Epoxy encapsulation moulding compound SMALL SCALE

Promoted List Under PIA 1986 – Related to Plastics

PIONEER STATUS (PS) Income tax exemption ranging from 70% or 100% for a period of 5 or 10

years

GENERAL LIST

INVESTMENT TAX ALLOWANCE (ITA) 60% or 100% on qualifying capital

expenditure for 5 years. Can be offset against 70% or 100% of statutory

income.

PIONEER STATUS (PS) 100% income tax exemption for a

period of 5 years

SMALL COMPANIES LIST

INVESTMENT TAX ALLOWANCE (ITA) 60% on qualifying capital

expenditure for 5 years. Can be offset against 100% of statutory

income.

Main Incentives

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Reinvestment Allowance

60% on qualifying capital expenditure for 15 consecutive years

(Application to be submitted to IRB)

Import Duty Exemption

For raw materials and components

(Application to be submitted to Tariff Division, MIDA)

Other Incentives

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IMPORT DUTY EXEMPTION

Self-Declaration Mechanism For Import Duty Exemption on Machinery and Equipment Through The Customs Duties (Exemption) Order 2013

Import Duty Exemption on Raw Materials / Components

SELF-DECLARATION

MECHANISM

Improve business efficiency

Confirmation letter issued once by MIDA valid

until 31/12/2017

Permission to claim the exemption can be obtained

within a period of two (2) weeks from Customs

No necessity to use the bank guarantee facilities

for the clearance of goods

No necessity to redeem the bank guarantee

No additional costs incurred

Self-declaration and self-regulated

have enjoyed the facilitation up to 3rd August 2015

www.mida.gov.my

Scope of Exemption

Customs Duties

(Exemption) Order

2013

Qualifying Criteria

Import duty exemption on machinery

and equipment excluding spare parts

and consumables imported or purchased

from a Licensed Manufacturing

Warehouse (LMW), Bonded Warehouse

or Free Zone (FZ)

Under item 115

The machinery and equipment,

must be new, unused and directly

used in the manufacturing process

of the finished product(s) at the

approved manufacturers’

premise(s)

www.mida.gov.my

STEP 1 : APPLICANT Submit the following form online via https://jpc.online.mida.gov.my to obtain the confirmation letter from

MIDA: SPM 1/2015 - Manufacturer in PCA

STEP 2 : MIDA Accept complete application form and supporting documents Issuance of the confirmation letter via online

STEP 3 : APPLICANT View and download the confirmation letter via https://jpc.online.mida.gov.my/midawebpki/checkStatus.jsp Provide complete information on the machinery and equipment to be imported in Appendix I, downloaded

via http://www.customs.gov.my. Submit the following documents to the State Customs Control Station (Industrial Section) to obtain the

permission to import the machinery and equipment: Company’s covering letter Confirmation letter issued by MIDA Appendix I (hard copy and soft copy)

STEP 4 : STATE CUSTOMS CONTROL STATION (INDUSTRIAL SECTION) Accept complete Appendix I and supporting documents Verify the confirmation letter issued by MIDA and other company’s document via

https://jpc.online.mida.gov.my/SMPCMIDA Issuance of the permission letter for the importation of the machinery and equipment

STEP 5 : APPLICANT Submit the permission letter to the Customs Import/Export and Border Control Branch for the clearance of

goods Notify MIDA and the related State Customs Control Station (Industrial Section) when a company ceases

operation or winds up

www.mida.gov.my

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5

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Please insert your own text

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IMPORT DUTY EXEMPTION ON RAW

MATERIALS / COMPONENTS

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Scope of Exemption Qualifying Criteria

Import duty exemption on

raw materials /

components

Directly used in the manufacturing activity(s) at

the approved premise(s) and subject to local

availability

Minimum duty exemption which will be

considered for evaluation: RM5,000 (subject to

changes)

Application must be submitted before the

materials are imported

Period of exemption 1 - 3 years

Type of

Application

New /

Extension

Additional

Quantity

Appeal

Post Approval

(Amendments

on Approval)

Current

Form

PC2 PC2-1 Company’s

letter with

justification &

supporting

documents

Company’s letter

with justification &

supporting

documents

Mode of

Submission

Online / Manual Manual

Step 1 • Submission of application through online/physical form

Step 2 • Accept complete application and issued acknowledgement

letter

Step 3 • Evaluation by the processing officer

Step 4 • Decision made in the JPC2 meeting

Step 5 • Notify company on the decision through email

Applicant

MIDA

MIDA

JPC2 Committee

MIDA

Tariff Division Tel : 603-22673539 Fax : 603-22745156 E-mail : tarif@mida.gov.my Website : www.mida.gov.my

For further clarification, please contact:

New Incentives Under The 2015 Budget

Capital Allowance to Increase Automation

in Labour-Intensive Industries

Incentive for Less Developed Areas

Incentive for the Establishment of

Principal Hub

Incentive for Industrial Area Management

Incentive for Industrial Area Management

Category 2:

Other industries - ACA of

200% on the first RM2 million

expenditure incurred within

Year of Assessment 2015 to

2020.

IMPLEMENTATIO

N TIMELINE

Manufacturing

companies (labour

and non-labour

intensive) operating

at least 36 months in

Malaysia

Category 1:

Year of Assessment

(YA) 2015 – YA 2017

TARGET GROUP TYPE OF INCENTIVE

Category 2:

Year of Assessment

(YA) 2015 – YA 2020

Category 1:

Labour intensive industries

(rubber products, plastics,

wood, furniture and textiles) –

ACA of 200% on the first RM4

million expenditure incurred

within Year of Assessment

2015 to 2017.

ACCELERATED CAPITAL ALLOWANCE (ACA)

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Possesses a valid Business Licence from

Local Authority and/or Manufacturing Licence

from MITI

Company residing in Malaysia and in

operation for at least 36 months

Expenditure incurred within the relevant years

of assessment

ELIGIBILITY CRITERIA

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APPLICATION PROCEDURES

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To submit ACA form to the respective division in

MIDA for non-technical eligibility;

To submit application to SIRIM for each

machine’s verification of productivity level

(technical eligibility).

Implementation timeline:

- Category 1:

Year of Assessment (YA) 2015 – YA 2017

- Category 2:

Year of Assessment (YA) 2015 – YA 2020

Income Tax Exemption :

100% up to 15 years of assessment (5+5+5) OR

Investment Tax Allowance :

100% of qualifying capital expenditure incurred within 10 years

Stamp Duty Exemption on :

Transfer or lease of land or building used for development in relation to

manufacturing and services activities

Witholding Tax Exemption on :

Fees for technical advice, assistance or services or royalty in relation to

manufacturing or services activities

Import Duty Exemption on :

- Raw materials & components used directly in the manufacturing process

- Machinery & equipment in the activity for the selected services sector

Incentives

INCENTIVE FOR LESS DEVELOP AREA

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TARGET

GROUPS

ELIGIBILITY

CRITERIA EFFECTIVE DATE

OF APPLICATION

Existing

companies

expanding their

operation into the

less developed

areas; OR

Newly established

companies

Undertake

manufacturing or

services activities in

less developed areas

with substantial

employment creation

and rural

development

Comply with

conditions including

value added, local

employment and

Managerial, Technical

and Supervisory

Index (MTS index)

Submission

period: 1 January

2015 to 31

December 2020

Application

submitted to

MIDA

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APPLICATION

PROCEDURES

Submission using

ICA/JA1 or

ICA/JA2 or

ICA/JA3

DEFINITION OF PRINCIPAL HUB

• A locally incorporated company that uses Malaysia as a base for conducting its regional and global businesses and operations to manage, control, and support its key functions including management of risks, decision making, strategic business activities, trading, finance, management and human resource.

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Strategic Services 1. Regional P&L/Business Unit

Management 2. Strategic Business Planning and

Corporate Development 3. Corporate Finance Advisory Services 4. Brand Management 5. IP Management 6. Senior-level Talent Acquisition and

Management

Business Services 1. Bid and Tender Management 2. Treasury and Fund Management 3. Research, Development &

Innovation 4. Project Management 5. Sales and Marketing 6. Business Development 7. Technical Support and

Consultancy 8. Information Management and

Processing 9. Economic/Investment Research

Analysis 10. Strategic Sourcing, Procurement

and Distribution 11. Logistics Services

Shared Services 1. Corporate Training and Human

Resource Management 2. Finance and Accounting

(Transactions, Internal Audit) 3. General Administration 4. IT Services

QUALIFYING SERVICES

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EFFECTIVE

DATE OF

APPLICATION

Newly established

companies; OR

Existing

companies

appointed by Local

Authority

100% tax exemption

on statutory income

for 5 years

commencing from the

date a company

commences its

activities

Submission

period: 1 January

2015 to 31

December 2017

Application

submitted to

MIDA

TARGET

GROUP

TYPE OF

INCENTIVE

INDUSTRIAL AREA MANAGEMENT

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Umarani Muniandy

Malaysian Investment Development Authority (MIDA)

Chemical & Advanced Materials Division

Tel: 03-2267 6678

Fax: 03-2274 8502

Email: umarani@mida.gov.my

www.mida.gov.my

Thank You MIDA Sentral No. 5 Jalan Stesen Sentral 5 K L Sentral 50470 Kuala Lumpur Tel. 03 – 2267 3633, Fax. 03 – 2274 7970 investmalaysia@mida.gov.my 42

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