Covid-19: Latest Government Measures to Attract and Retain Foreign Investments in Malaysia
24 June 2020
On 5 June 2020, the Prime Minister of Malaysia, Tan Sri Muhyiddin Yassin launched the Short-Term Economic Recovery Plan
(‘Penjana’), comprising of 40 initiatives with a total value of RM35 billion to stimulate the Malaysian economy, propel businesses and empower the people, as part of the Government’s pro-active steps to counter the economic downturn caused by the Covid-19 pandemic. We list out below three main initiatives under Penjana which are relevant to foreign parties interested in investing or re-shoring their businesses in Malaysia.
Firstly, Initiative No. 34 of Penjana, titled “Malaysia as an Attractive Horizon for Businesses
”, to be implemented from July 2020 to December 2021, includes the following measures:
- Companies relocating to Malaysia will be eligible for:
- 0% tax rate for 10 years for new investments in the manufacturing sectors with capital investment between RM300 million to RM500 million;
- 0% tax rate for 15 years for new investments in the manufacturing sectors with capital investment above RM500 million; and
- 100% investment tax allowance for three years for existing companies in Malaysia relocating overseas facilities into Malaysia with capital investment above RM300 million.
It is to be noted that a condition for (a) and (b) is that the company must relocate to Malaysian within one year from the date of approval, and invest in Malaysia within three years from the date of approval;
- Special reinvestment tax allowance for manufacturing and selected agriculture activities from years of assessment 2020 to 2021;
- Additional operational expenditure has been allocated to the Malaysian Investment Development Authority (‘MIDA’), a government agency under the Ministry of International Trade and Industry (‘MITI’), to carry out promotional and marketing activities to attract foreign investment;
- Establishment of the Project Acceleration and Coordination Unit (PACU) in MIDA to facilitate the approval process and speed up the implementation and coordination of approved manufacturing projects;
- Enhancement of the Domestic Investment Strategic Fund (DISF), which is a grant on a matching (1:1) and reimbursable basis, to accelerate the shift of Malaysian-owned companies in targeted industries to higher value added, high technology, knowledge intensive and innovation-based manufacturing and services industries, such as aerospace, medical devices, pharmaceuticals, advanced electronics, machinery and equipment, research and development, design and development, logistics service providers (3PL) and integrated green technology projects; and
- A more efficient approval system for manufacturing licences for non-sensitive industries where approval will be granted within two working days of submission of a complete application.
Fast following the implementation of Initiative No. 34, MIDA announced on 11 June 2020 that it has signed a Memorandum of Understanding (‘MoU’) with Standard Chartered Bank Malaysia Berhad (‘SCB’) to attract targeted global investment into Malaysia, in particular in sectors with high-value, high-technology and high-impact investments, such as electrical and electronics, machinery and equipment, medical devices, aerospace, renewable energy and consumer technology. The MoU, through SCB’s local expertise and global reach, enables potential foreign investors to gain access to banking services and foreign direct investment advisory services. SCB will also be complementing MIDA’s marketing and trade exchange initiatives such as trade and investment missions, conferences and roundtable meetings, including a series of webinars, to globally connect potential investors.
Secondly, Initiative No. 26 of Penjana, titled the “Dana PENJANA Nasional”, is a RM1.2 billion investment fund which will be established beginning from July 2020 (with RM600 million from domestic sources and the remainder from international investors) and will match institutional private capital investment with selected venture capital and early stage tech fund managers for the following: (i) seed stage/ co-creation funds; (ii) series A/B funds; (iii) growth stage tech funds; (iv) venture debt funds; and (v) opportunistic funds (e.g. e-sports and healthcare).
Thirdly, foreign investors should also take note of Initiative No. 25 of Penjana, titled “Spur Set Up of New Businesses”, which aims to encourage the establishment of new businesses and transactions such as mergers and acquisitions, with an allocated quantum of RM300 million, beginning from July 2020. Initiative No. 25 provides the following financial incentives:
- Income tax rebate up to RM20,000 per year for three years of assessment will be granted to Small and Medium-sized Enterprises (‘SMEs’) which are established between 1 July 2020 to 31 December 2021; and
- Stamp duty exemption will be granted to SMEs on any instrument executed for mergers and acquisitions during the period between 1 July 2020 to 30 June 2021.
Lastly, in addition to the above initiatives under Penjana, the Licensing Officer of MITI has announced that an automatic extension of 12 months will be granted to manufacturing companies which have been accorded a Manufacturing Licence under the Industrial Coordination Act 1975 (‘ICA’) but have been unable to implement their projects within the project implementation period stipulated in their Approval Letter of Manufacturing Licence (‘Approval Letter’) due to the Covid-19 pandemic. The 12-month extension period will commence from the end date of the initial project implementation period stated in the Approval Letter and is applicable to companies that have obtained Interim Approvals or Manufacturing Licences under the ICA from MITI, and have yet implemented their projects. To enjoy this extension, companies are required to apply to MIDA by completing an online form
provided in MIDA’s media statement posted on 16 June 2020. Companies can submit their applications to MIDA from 16 June 2020 until 31 May 2021.
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