Investing in Iskandar

investing in iskandar
Iskandar development regIon a strong & sustainable metropolis of international standing
Malaysia
Johore
singapore
indonesia
Malaysia is one of the fastest-growing economies in the region. A country that offers much promise as an exciting emerging market with high growth potential. The Ninth Malaysia Plan (9MP), Malaysias economic map for the years 2006 to 2010, incorporates vital provisions and initiatives for further economic development. Of these, one initiative set to spearhead the growth of the Malaysian economy is the Iskandar Development Region (Iskandar). The first of its kind, Iskandar is set within southern Peninsular Malaysias most developed region of international standard - a bustling, vibrant metropolis that centres on quality living, business and entertainment - amidst a pristine environment. Iskandar, which has been allocated RM4.3 billion by the Government, encompasses a vast acreage of land, making it the largest single development project ever to be undertaken in the region. Its strategic location, beside Singapore and between the booming economies of China and India, accessibility to leading Asian cities; excellent air, road, sea and rail connectivity, proximity to some of the worlds most rapidly growing and important economies; and range of attractive fiscal and non-fiscal incentives present Iskandar as an outstanding investment opportunity. Iskandar is poised to attract an exciting influx of foreign and high-level corporate investments as discerning investors look to cash in on its many advantages and high growth potential. Nows the right time. As a serious investor, take the first step to discover Iskandars exciting investment climate, and how it can positively impact your returns.
pg.
quick facts chapter 1: introduction 1.1 Malaysia as an Ideal Investment Destination 1.2 Background of Iskandar 1.2.1 International Positioning of Iskandar 1.2.2 Iskandars Positioning 1.2.2.1 Global 1.2.2.2 Regional 1.2.2.3 Geographical Coverage 1.2.3 Four Essential Components of Iskandar 1.3 The Comprehensive Development Plan (CDP) 1.3.1 Strategic thrust of the CDP 1.4 Present and Future Structure of the Iskandar Economy 1.5 The Iskandar Regional Development Authority (IRDA) 1.5.1 One Stop Centre 1.6 South Johor Investment Corporation (SJIC) chapter 2: LegaL system 2.1 Foundation of the Legal System 2.2 System of Government in Malaysia 2.3 istribution of Powers between the Federal, State and Local D Governments 2.4 Independence of the Judiciary 2.5 Malaysian Court System 2.5.1 Superior Courts 2.5.2 Subordinate Courts chapter 3: Business environment 3.1 Snapshot of the Current Economic Situation and Projected Economic A Growth 3.2 The Ninth Malaysia Plan (9MP) and Third Industrial Master Plan (IMP3) 3.2.1 The Ninth Malaysia Plan (9MP) 3.2.2 The Third Industrial Master Plan (IMP3) 3.3 Inflation Rate 3.4 Interest Rate 3.5 Knowledge Workers chapter 4: foreign investment 4.1 Foreign Investment Committee (FIC) 4.1.1 Broad Equity Policy 4.1.2 Acquisition of Real Estate/Property by Foreign Parties chapter 5: Banking system 5.1 Financial Institutions 5.2 Malaysia as an International Islamic Financial Centre 5.3 International Offshore Financial Centre 5.4 Capital Market 5.4.1 Equity Instruments 5.4.2 Debt Securities 5.4.3 Derivatives 5.4.4 Islamic Instruments
6 15 16 16 16 16 16 18 18 18 19 20 21 22 22 25 25 25 26 26 26 26 29 32 32 34 35 35 37 41 41 42 45 45 46 47 47 47 48 48
InvestIng In Iskandar
table of contents
chapter 6: exchange controLs 6.1 Exchange Control 6.1.1 External Accounts 6.1.2 Foreign Currency Accounts 6.1.3 Repatriation of Profits to Foreign Shareholders 6.1.3.1 Distribution of Dividends 6.1.3.2 Payment of Fees 6.1.3.3 Voluntary Liquidation/Capital Reduction 6.1.4 Foreign Credit Facilities 6.1.5 Provision of Credit Facilities to Non-Residents 6.1.5.1 Foreign Currency Credit Facilities 6.1.5.2 Ringgit Credit Facilities 6.1.6 IOFC Entities 6.2 Foreign Exchange Administration Policy for Iskandar chapter 7: structure of Business entities 7.1 Companies Incorporated in Malaysia 7.1.1 Forms of Companies 7.1.1.1 Companies Limited by Shares 7.1.1.2 Companies Limited by Guarantee 7.1.1.3 Companies Limited by both Shares and Guarantee 7.1.1.4 Unlimited Companies 7.1.2 Incorporation of a Company 7.1.2.1 Registration of a New Company 7.1.2.2 Purchase of a Shelf Company 7.1.2.3 Who can Incorporate a Company? 7.1.3 Shareholders 7.1.3.1 Conditions and Characteristics 7.1.3.2 Number of Shareholders 7.2 Branches of Foreign Companies 7.3 Joint Ventures 7.4 Sole Proprietorship 7.5 Partnership 7.6 Representative Office/Regional Office chapter 8: financing reporting and audit requirements 8.1 Accounting Standards 8.2 Audit Requirements 8.3 Record Keeping chapter 9: inteLLectuaL property 9.1 Patents 9.2 Copyright 9.3 Trademarks 9.4 Industrial Designs 9.5 Layout Designs of Integrated Circuits chapter 10: taxation 10.1 Tax Administration 10.1.1 Self-assessment System 10.1.2 Payment of Tax 10.1.2.1 Companies 10.1.2.2 Individuals 10.1.2.2.1 Employment 10.1.2.2.2 Self-employment/Sole Proprietors 10.1.3 Public Rulings
51 51 51 52 52 52 52 53 53 53 53 54 54 57 57 57 57 58 58 58 58 58 58 59 59 59 59 60 60 60 60
63 63 64 67 67 68 68 68 71 71 71 71 71 72 72 72
10.2 Direct Taxes 10.2.1 Companies 10.2.1.1 Scope of Taxation 10.2.1.2 Corporate Tax Residence 10.2.1.3 Rate of Tax 10.2.1.4 Tax Computation 10.2.1.4.1 Source Basis 10.2.1.4.2 Deductible Expenditure 10.2.1.4.3 Capital Allowances 10.2.1.4.4 Tax Losses 10.2.1.4.5 Tax Incentives 10.2.1.4.6 Transfer Pricing 10.2.2 Individuals 10.2.2.1 Scope of Taxation 10.2.2.2 Residence 10.2.2.3 Tax Rates 10.2.2.4 Personal Reliefs 10.2.3 Withholding Tax 10.3 Capital Taxes and Transfer Taxes 10.4 Indirect Taxes 10.4.1 Value Added Tax (VAT)/Goods and Services Tax (GST) 10.4.2 Sales Tax 10.4.3 Service Tax 10.4.4 Customs Duty 10.4.5 Excise Duty chapter 11: immigration and empLoyment matters 11.1 Immigration Requirements 11.1.1 Visas 11.1.2 Employment Passes 11.1.3 Policy Regarding Employment of Expatriate Personnel 11.1.4 Application for Expatriate Posts 11.1.5 Employment of Foreign Workers 11.1.6 Special Categories of Employment Passes 11.2 Legal Requirements under the Employment Act 1955 11.3 Employees Provident Fund (EPF) 11.4 Social Security Organisation (SOCSO) chapter 12: incentive and support package 12.1 Approved Node 12.1.1 Location Map - Node 1 12.2 Tax Incentives Available to Companies in Iskandar 12.3 Non-fiscal Incentives for Iskandar 12.4 Qualifying Activities 12.5 Application Process chapter 13: frequentLy asked questions (faqs) usefuL information/addresses/ sources of information/gLossary & definition
72 72 72 72 72 73 73 73 74 75 76 76 76 76 77 77 78 78 79 79 79 79 80 81 82 85 85 86 87 87 87 88 90 90 90 93 93 93 94 95 96 99 105
Introduction
Legal System
Business Environment
Foreign Investment
Banking System
Exchange Controls
Structure of Business Entities
Financing Reporting and Audit Requirements
Intellectual Property
Taxation
Immigration and Employment Matters
Incentive and Support Package
Frequently Asked Questions (FAQs)
Useful Information/Addresses/Sources of Information/Glossary & Definition
Malaysia
MALAySIA IS STRATEGICALLy LoCATED In ThE ASIA PACIFIC REGIon ALonG ThE STRAITS oF MALACCA AnD SoUTh ChInA SEA, BoRDERInG ThAILAnD, SInGAPoRE AnD InDonESIA.
population age structure
27.17 million1 14 years and below: 32.2% 15 64 years: 63.4% 64 years and above: 4.4% Malays make up about 57% of the population whilst the rest of the population is made up of other ethnic groups comprising Chinese, Indians and others2 Islam is the official religion but all other religions are freely practised, particularly Christianity, Buddhism and Hinduism2 Bahasa Malaysia (Malay language) is the national language but English is widely spoken. The ethnic groups also speak various languages such as Mandarin and Tamil and dialects such as Cantonese, Hokkien and many others Kuala Lumpur 13 states (Johore, Kedah, Kelantan, Melaka, Negeri Sembilan, Pahang, Perak, Perlis, Pulau Pinang, Sabah, Sarawak, Selangor & Terengganu); Federal Territory of Kuala Lumpur, Labuan, and Putrajaya The unit of currency is Malaysian Ringgit indicated as RM. Foreign currency can be converted at banks and money changers
people
religion language
capital adMinistrative divisions currency
gdp (current prices) RM573 billion [2006]1, RM298 billion [1st & 2nd Qtr 2007]1
pg.
ChiNa
quick facts
NePal baNGlaDesh myaNmar iNDia laos thailaND vietNam CamboDia hoNG koNG
PhiliPPiNes
sri laNka
bruNei malaysia siNGaPore iNDoNesia
GDP (Constant 2000 PriCes) GDP Growth rate (Constant 2000 PriCes) Per CaPita GNi CPi total exPorts total imPorts labour ForCe uNemPloymeNt rate PubliC holiDays
RM474 billion [2006]1, RM244 billion [1st & 2nd Qtr 2007]1 5.9% [2006]1, 5.7% [2nd Qtr 2007]1 RM20,841 [2006]1, RM20,898 [1st Qtr 2007]1 3.9% [2006] 3, 2% [Jan Jul 2007]1 RM589 billion [2006]1, RM283 billion [Jan Jun 2007]1 RM481 billion [2006]1, RM239 billion [Jan Jun 2007]1 10.63 million [2006]1, 10.83 million [1st Qtr 2007]1
3.3% [2006]1, 3.4% [1st Qtr 2007]1
Public holidays are given to major festive/religious occasions such as Hari Raya Puasa (Eid), Chinese New Year, Deepavali, Wesak Day and Christmas. Other public holidays include New Years Day (January 1), Labour Day (May 1), Kings Birthday (1st Saturday in June) and National Day (August 31)
Sources: 1 ww.statistics.gov.my w (as at 4 September 2007) 2 3 www.idr.com.my Economic Report 2006/2007 published by the Ministry of Finance, Malaysia
pg.
Johore
Johore has a plentIful supply of affordable IndustrIal land and factory premIses, commercIal floor space, skIlled workers and supportIng servIces.
capital population total area strategic location Johore districts business-Friendly and eFFicient public services
Johore Bahru 3.17 million (in 2005)1 19,984 sq km1 Johore is located at the southernmost state of Peninsular Malaysia and neighbouring Singapore Johore Bahru, Segamat, Pontian, Kluang, Batu Pahat, Mersing, Muar and Kota Tinggi2 The State Government has set up various facilities to support and assist investors such as the Johor State Investment Centre (JSIC), Industrial Development Committee, Industrial Park Management Committee, Johor Skills and Knowledge Management Centre and Johor Skills Development Centre 4 Johore has a plentiful supply of affordable industrial land and factory premises, commercial floor space, skilled workers and supporting services. The cost of doing business in Johore is relatively low in comparison with some neighbouring countries 4 Resource-based industries: Palm oil and rubber-based products, herbal products, wood products and biotechnology3 Non-resource based industries: Electrical & electronic products, marine & port-related industries and services, petrochemical products and engineering (M&E) 4 Johores economic structure has developed considerable depth with supporting and complementary industries existing side by side with a large pool of skilled workforce and strong financial and other institutional support services. This has spurred many leading multinational corporations to set up base and grow in Johore. The State of Johore has an impressive track record of successful businesses 4
cost-eFFectiveness
MaJor econoMic activities
a Matured econoMic base and success story
pg.
quick facts
perlis kedah penang perak kelantan terengganu
labuan sabah
selangor wilayah persekutuan negeri seMbilan
pahang sarawak
Melaka
Johore
excellent living environMent and high Quality oF liFe
Johore has excellent housing facilities in secured environments with beautiful landscaping. Nature-lovers and adventure-seekers can enjoy the numerous and varied rest and recreational facilities on both land and sea. Major attractions are Mount Ledang, beautiful beaches such as Desaru, Stulang Laut and Teluk Ramunia as well as several islands off Johore such as Rawa Island, Besar Island and Sibu Island. In addition, the rare and unique RAMSAR wetlands (situated in Pulau Kukup, Sungai Pulai and Tanjung Piai) and surrounding mangrove areas within Iskandar provide great opportunities for tourism activities. The cost of living is also comparatively low in comparison with some neighbouring countries 4.
Sources: 1 omprehensive Development C Plan for Iskandar 2 www.johordt.gov.my 3 www.idr.com.my 4 www.sjic.com.my
pg.
Iskandar Development Region

ISkAnDAR DEvELoPMEnT REGIon IS SET wIThIn SoUThERn PEnInSULAR MALAySIAS MoST DEvELoPED REGIon, whERE LIvInG, EnTERTAInMEnT, EnvIRonMEnT AnD BUSInESS SEAMLESSLy ConvERGE wIThIn A BUSTLInG AnD vIBRAnT METRoPoLIS.
land size population
Iskandar covers a land size of 2,217 sq km (221,634 hectares)

Iskandar is estimated to contain 1.35 million people (or 43% of Johores population of 3.17 million in 2005) with a workforce of approximately 66% of the population Total Iskandar GDP is about USD20 billion in 2005 (about 60% of Johores total GDP of USD33.4 billion) In 2005, the per capita GDP for Iskandar is about USD14,790 which is higher than Johores per capita GDP of USD10,757 Services and manufacturing sectors are 2 main pillars of Iskandars economy (dominated by the services sector which contributes about USD10 billion in Iskandar) Within the services sector, Wholesale and Retail Trade contributes (42.2%), Tourism and Hospitality (16.8%), Professional and Business (14.6%), Transport and Related (12.7%), Medical and Educational (6.7%), Educational (6.7%), and Financial (6.6%)
gdp
pg. 10
Johore
quick facts
senai-skudai
iskandar
Johore bahru city centre nusaJaya western gate developMent node 1
singapore
eastern gate developMent
vision oF iskandar Iskandar accounts for 60% of the State of Johores GDP with the services sector being the largest source of growth Accessibility to a large, educated workforce that is skilled and proficient in English, Bahasa Malaysia and other international languages such as Mandarin A mixture of green-fields and brown-fields and lower cost of living as compared with Singapore and Hong Kong State-of-the-art telecommunication infrastructure Efficient and transparent public institutional framework World-class land, sea and air cargo facilities that allow good supply and distribution of raw materials Modern airport in Senai, handling 1.25 million visitors and over 7,500 tonnes of cargo in 2005 Port of Tanjung Pelepas and Pasir Gudang Port established world-class transshipment ports of Malaysia Significant advancement in the knowledge-based clusters such as information technology, biotechnology, tourism, education & healthcare, Islamic finance, manufacturing and electrical and electronic industries Excellent international tourist destinations and sports facilities, including shopping and healthcare & wellness Low inflation rate (less than 3.5%) The above advantages will facilitate the sustainable development concept of a complete lifestyle with a balanced mixture of Eastern culture, heritage and style of architecture, coupled with the latest technology, world-class logistics and security systems. pg.
Sources: www.idr.com.my
Malaysia
Johore
Chapter 1 Introduction
1.1 Malaysia as an ideal investMent destination 1.2 background oF iskandar 1.2.1 INTERNATIONAL POSITIONING OF ISKANDAR 1.2.2 ISKANDARS POSITIONING 1.2.2.1 GLOBAL 1.2.2.2 REGIONAL 1.2.2.3 GEOGRAPhICAL COVERAGE
1.2.3 FOuR ESSENTIAL COMPONENTS OF ISKANDAR
1.3 the coMprehensive developMent plan (cdp) 1.3.1 STRATEGIC ThRuST OF ThE CDP 1.4 present and Future structure oF the iskandar econoMy 1.5 the iskandar regional developMent authority (irda) 1.5.1 ONE STOP CENTRE 1.6 south Johor investMent corporation (sJic)
beijing
china
nepal
kathmandu
india
bangladesh dhaka MyanMar chittagong laos vientiane yangoon thailand bangkok caMbodia phnom penh vietnaM philippines hanoi hong kong
sri lanka colombo Malaysia kuala lumpur Johore singapore indonesia bandar seri begawan (brunei)
4-6 hr Flight Radius
2-4 hr Flight Radius
2 hr Flight Radius Jakarta
malaysIa has emerged as a dynamIc market wIth hIgh growth potentIal
introduction
chapter 1
Introduction
Malaysia as an ideal investMent destination
1.1
Malaysia is strategically located in the Asia Pacific Region along the Straits of Malacca and South China Sea, bordering Thailand, Singapore and Indonesia. The country is geographically divided between West Malaysia (often referred to as Peninsular Malaysia) and East Malaysia.
West Malaysias neighbouring countries are Thailand (to the North), Singapore (to the South) and the Indonesian islands of Java and Sumatra (to the West). East Malaysia, which occupies approximately 1/3 of the island of Borneo, comprises two Malaysian States, namely, Sabah and Sarawak. Malaysia gained independence in 1957, and has grown from strength to strength since then. In the early years post-independence, the prime source of revenue to the country came from natural resources, such as tin ore, rubber and agricultural produce. Malaysias geographical location in the Asian region, together with its strong infrastructure including its ports and airports, were instrumental in facilitating its growth. During the 1980s, the industrial sector grew significantly, driving the economy forward and achieving strong growth rates. During this period, there was a significant rise in foreign direct investment (FDI) with many foreign industrial players being attracted to Malaysias strong workforce and infrastructure. The Government also invested heavily in infrastructure development during this time with the building of highways across the country and upgrading of transport and other public facilities, which in turn fuelled further growth. Despite a dip in FDI during the Asian financial crisis in 1997-1998, the country continues to attract investment from abroad and has also generated significant private sector investment locally in recent years. While the manufacturing and agricultural sectors continue to be strong economic contributors, the services sector is emerging as a growth area as the country continues its journey to becoming a fully developed nation. The Malaysian Government has offered investors a host of fiscal incentives over the years, including full tax exemptions for up to 10 years and partial tax exemptions up to 70% of statutory income (i.e. tax adjusted income after taking into account capital allowances, the equivalent of tax depreciation). Additionally, there have been many incentives in the indirect tax regime, such as the designation of free zones and bonded warehouse facilities. Aside from tax incentives, Malaysia is a prime location for foreign investment due to its sound legal system (which is largely based on the British legal system), excellent infrastructure, availability of a large, skilled workforce and stable political and economic environment. To secure Malaysias position as a strong economy in the region, the Government has taken the bold initiative to designate a unique investment area, known as the Iskandar Development Region (Iskandar), which will provide a range of fiscal and other incentives to spearhead the growth of the Malaysian economy and attract FDI. The Iskandar concept is the first of its kind in Malaysia and is designed to take the economy to new heights.
pg. 5
1.2
background oF iskandar
1.2.1 International Positioning of Iskandar Located in the State of Johore, Iskandar: lies at the heart of the Southeast Asia at the southern tip of Peninsular Malaysia within minutes from Singapore is strategically located at the crossroads of East-West trade lanes lies mid-way between the booming economies of China and India is only a 4 to 8 hour flight from leading as well as fast-growing Asian cities such as Bangalore, Bahrain, Delhi, Dubai, Hong Kong, Hanoi, Ho Chi Minh, Shanghai and Taipei. It is also within reach of a global market of some 800 million people Iskandar is readily accessible by air with an international airport in Johore and a mere hours drive away from Singapore Changi Airport. By road, Kuala Lumpur, Malaysias capital city, is an approximately 4-hour drive away on excellent highways. Access is also available via rail using Malaysias comprehensive railway network and by sea, as Iskandar is flanked by 3 major ports Pasir Gudang Port, Port of Tanjung Pelepas and Tanjung Langsat Port. 1.2.2 Iskandars Positioning Iskandar is set to become southern Peninsular Malaysias most developed region, where living, entertainment, environment and business seamlessly converge within a bustling and vibrant metropolis. 1.2.2.1 Global From a global perspective, the development of Iskandar must be viewed in the context of the challenges presented by trade and service liberalisation which has had a tremendous impact on the movement of capital and skilled workforce, development of ICT and flow of information. The development of Iskandar responds to these challenges with the realisation that economic prosperity in modern times depends on being globally competitive. Hence, Iskandar is positioned as an international city to reduce trade barriers and increase human mobility and international financing, which greatly influence the activities of giant international corporations. The incentive packages offered to investors and players in Iskandar have been formulated with consideration to these challenges as far as possible. 1.2.2.2 Regional From a regional perspective, the development of Iskandar will lend a greater competitive edge to the region and will benefit significantly from the air and sea linkages within Asia-Pacific countries and Malaysias membership in the Indonesia-Malaysia-Singapore Growth Triangle (IMS-GT). With market forces leading the way in the IMS-GT strategies, the private sector acts as a driving force; and governments as the facilitators. Concentrating on economic relations between Johore and Singapore and between Singapore and Riau, especially Batam Island (Indonesia), the IMSGT offers great advantages to Johore as it is situated next to Singapore. Singapores current population of 4.2 million will become the extended Iskandar population threshold. Indonesia, especially Batam Island, is quickly becoming Southeast Asias fastest-growing offshore manufacturing centre thanks to its 750 multinational manufacturing companies that are represented in 20 industrial estates. These companies employ nearly 200,000 Indonesians, and more than 3,200 foreign workers from around the globe. With two direct road links to Singapore and sea links to Batam Island, Iskandar is in an excellent position to take advantage of the IMS-GT, which allows for international cooperation, human mobility and tourism.
pg. 1
introduction
nepal
bangladesh india
laos hong kong
MyanMar thailand vietnaM caMbodia sri lanka Malaysia
philippines
singapore indonesia
kuala luMpur
Johore
singapore
pg.
1.2.2.3 Geographical Coverage
kulai Municipal council pontian district council
kota tinggi district council
Johore bahru tengah Johore bahru city Municipal MukiM council council JeraM batu
pasir gudang local authorities
MukiM sg. karang MukiM serkat
singapore 690 sq.km.
Geographical Facts rea 2,217 sq A km @ 547,821 acres ore than 3 M times the size of Singapore times the size of 2 Hong Kong
Area of Coverage istrict of Johore D Bahru art of the District of P Pontian ukim of Jeram M Batu ukim of Sg. Karang M ukim of Serkat M ulau Kukup (Mukim P Ayer Masin)
Local Authorities ohore Bahru City J Council ohore Bahru Tengah J Municipal Council ulai Municipal K Council asir Gudang Local P Authorities ontian District P Council
1.2.3 Four Essential Components of Iskandar The development of Iskandar is based on four essential components as follows: i Formulation of a Master Business Plan, i.e. the Comprehensive Development Plan (CDP) ii Establishment of a strong regulatory authority, i.e. the Iskandar Regional Development Authority (IRDA) which will plan and facilitate approvals through a one-stop centre and address social development iii Establishment of a Super Developer, i.e. the South Johor Investment Corporation (SJIC) which will spearhead catalyst developments in Iskandar iv Packaged incentives to promote catalyst initiatives
1.3
the coMprehensive developMent plan (cdp) The CDP was specifically formulated for the development of Iskandar. The CDP addresses socio-economic development in a holistic and sustainable fashion, with particular emphasis being placed on creating a healthy investment climate that is attractive to local and foreign investors.
pg. 1
introduction
The CDP also incorporates effective delivery systems required in translating the plan into reality. In particular, the CDP incorporates the emphasis given under the Ninth Malaysia Plan (9MP) (refer to Chapter 3), where special provisions were made and RM4.3 billion was allocated for Iskandar alone. Iskandar encompasses 2,217 sq km of land, making it the largest single development project ever to be undertaken in the region. Aside from the excellent air, road, sea and rail links available to Iskandar, its strategic location and proximity to some of the worlds most rapidly growing and important economies are key differentiating factors for the development. 1.3.1 Strategic Thrust of The CDP Under the CDP, Iskandars strategic framework consists of the following: vision development of a strong and sustainable Metropolis of international standing the development of iskandar will be guided by 5 strategic pillars anchored by 3 key foundations
a strong and sustainable Metropolis oF international standing

strategic pillars
International Rim Positioning
Creation of Catalyst Projects
Establishment of Hard & Soft Infrastructure Enablers
IRDA as a Strong Regulatory Authority
Balanced SocioEconomic Equity
key Foundations
Equitable and Fair Distribution among Stakeholders Growth and Value Creation Nation Building
The development of Iskandar focuses on the balancing of human and physical aspects of development while promoting sustainable development by being mindful of the environment. Basically, the CDP: supports the existing development planning system serves as a guide for future economic, social, environmental and physical development contains policies and strategies for implementation plans for growth and sustainable development The areas of focus mentioned above also seek to ensure that improvement to the quality of community life would not compromise local environment and ecology. For this reason, the CDP has placed great emphasis on incorporating plans to ensure the preservation of South Johores natural environment specifically the unique wetlands which are rich in mangroves and inter-tidal mudflats. There continues to be a clear commitment to preserving these environmental assets since Iskandar was first conceptualised. The advice of environmental experts has been sought continuously in implementing the CDP.
pg.
Certain catalyst initiatives have been identified in support of the CDP which, amongst others, include the following: Waterfront development International destination resort International mixed commercial and residential development Leisure and tourism development Education and healthcare-based developments Further information on the CDP can be found at www.idr.com.my
1.4 present and Future structure oF the iskandar econoMy
One of the primary objectives of Iskandar is to attract FDI in areas that will enhance Malaysias competitiveness, particularly in the services sector where Malaysia is able to excel in. This is crucial since it is recognised that regional competition in the manufacturing sector will be difficult to surpass given the lower level of employment costs in many of the newly emerging economies. In view of this, 4 new Pillars from the services sector have been identified to support and reinforce the existing 5 Pillars of the local economy.
vision
iskandar econoMy strong, diversiFied, dynaMic and global
Food and Agro Processing
Electrical and Electronics
Logistics and Related Services
Educational Services
Petrochemicals and Oleochemicals
Five Existing Pillars shall be reinforced
Four New Pillars to be added
support systeM
Strong Supporting Industries (Metal Products, Engineering, Non-metallic and Manufacturing-Related Services) Strong Supporting Institutions (Education, R&D, Government, Private and Social Institutions, Communication and Coordination Systems) World-class Professionals and Technical Workforce
basic Foundation
Excellent Physical and Infrastructure, including IT Excellent Working and Living Environment Stable Political and Social Environment
pg. 20
the well-established sectors which are manufacturing-based will be reinforced while giving new emphasis on new sectors which are services-based
Creative Industries
the Main pillars (drivers)
Financial Services
Health Services
Tourism
introduction
Accordingly, 6 services-based Pillars have been identified and established in the CDP outlined below: Creative Healthcare Educational Logistics Financial advisory and consulting Tourism The services above are crucial to Malaysias development as a services hub to service the region supported by state-of-the-art facilities and infrastructure. Indeed, Malaysia is: transforming into an educational hub in the region with the emergence of an increasing number of private schools, international schools, private colleges and universities offering a wide range of educational opportunities an attractive healthcare haven with many overseas patients seeking medical services in Malaysia a fast growing health-tourism spot From the social perspective, one of the key aspects of the CDP is to create a living environment that provides a high quality lifestyle for Iskandar residents. This would be achieved through the provision of attractive living accommodation facilities, entertainment and recreation facilities within a green environment as well as excellent education and healthcare facilities. In line with this, the development in Iskandar will include a new administrative centre in Nusajaya, a Waterfront City, Medical Hub, Educity and an exclusive holiday resort. To ensure that the vision and mission of Iskandar are met, IRDA has been established to oversee the development and activities of Iskandar and facilitate investors in a timely manner.
1.5 the iskandar regional developMent authority (irda)
IRDA is a Federal statutory body established under the Iskandar Regional Development Authority Act 2007 which came into force on 17 February 2007. It is responsible for realising the vision and objectives of Iskandar in becoming a metropolis of international standing. Both the Prime Minister and Chief Minister (or Menteri Besar) of Johore act as Co-Chairmen of IRDA. This will facilitate a close cooperation between the Federal and State Governments to ensure the smooth and effective implementation of all initiatives in Iskandar. IRDA provides a facilitative environment for investors by responding to their needs in a timely and transparent manner. IRDAs key functions are: Planning Establish national policies, direction and strategies for Iskandar Formulate and implement the CDP Integrate planning policies and strategies of the Federal Government, State Government of Johore and local authorities relevant to Iskandar Identify and recommend new policies, laws and actions to enhance the competitiveness of Iskandar Promotion Promote and stimulate Iskandar as a trade, investment and logistics centre, dutyfree area and tourist destination Promote private sector investment in targeted sectors Facilitate and undertake economic, physical and social development in Iskandar Processing Act as principal coordinating agent on behalf of relevant Government agencies in relation to receiving, processing and expediting the requisite approvals Render administrative services and assistance to facilitate requisite approvals in connection with matters within Iskandar pg. 2
1.5.1 One Stop Centre IRDA will establish a One Stop Centre (OSC) as a point-of-call for investors in Iskandar to obtain approvals for various aspects of developments such as planning and land matters, licenses and permits, immigration, business set-up and incentives. The OSC, which acts as a principal coordinating and facilitation agent on behalf of the Government, will offer a multi-channel government-investor interface through the employment of simplified processes and work procedures. The scope of the OSC will be confined to dealings with IRDA clients (i.e. investors undertaking major and strategic developments and investments in Iskandar, including those which are catalytic and have a high positive impact to Iskandar and the nation). In this respect, non-IRDA clients are expected to use the existing channels in their dealings with the respective government agencies for various applications for approvals. An Approvals and Implementation Committee (AIC) has been established to enable IRDA to adopt an investor-friendly mindset and efficient work processes. This committee serves to identify, monitor and coordinate the roles and activities of relevant government entities in order to expedite the processing, approval and the implementation of major or strategic developments and investments in Iskandar. For enquiries, please e-mail to: enquiries@irda.com.my.
1.6 south Johor investMent corporation berhad (sJic)
SJIC is the investment-holding company mandated to drive the commercial developments in Iskandar. SJIC promotes, coordinates and invests in strategic and catalytic initiatives through shareholding stakes in joint ventures or contribution of land either through sale or lease or granting of a concession or development rights. The mission of SJIC is to promote and coordinate the overall development and international positioning of Iskandar. The stakeholders of SJIC are Khazanah Nasional Berhad, Employees Provident Fund and Kumpulan Prasarana Rakyat Johor Berhad (KPRJ). KPRJ is a company wholly-owned by the Johore State Government. SJIC is set up with total assets of approximately RM3.4 billion in land banks and cash. As an investment-holding company, SJIC is a commercial entity with long-term profit objectives. SJIC will develop public-private partnerships to accelerate and enhance the growth of Iskandar. SJIC is tasked to facilitate the implementation of Government-funded projects under the 9MP (2006 - 2010). For more information and enquiries on SJIC please visit http://www.sjic.com.my.
pg. 22
Chapter 2 Legal System

2.1 Foundation oF the legal systeM 2.2 systeM oF governMent in Malaysia 2.3 distribution oF powers between the Federal, state and local governMents 2.4 independence oF the Judiciary 2.5 Malaysian court systeM 2.5.1 SuPERIOR COuRTS 2.5.2 SuBORDINATE COuRTS
the malaysIan legal system operates on the basIs of parlIament enactIng legIslatIon, an Independent JudIcIary and a court system sImIlar to other commonwealth countrIes
legal system
chapter 2
Legal System
overview oF the legal systeM in Malaysia Foundation oF the legal systeM
2.1
The foundation of the Malaysian legal system is based on a set of written and unwritten laws. The Federal Constitution together with the constitutions of the States, legislation enacted by Parliament (Acts of Parliament) and delegated legislation made by statutory bodies under powers conferred on them by Acts of Parliament form the integral part of the written laws. The unwritten laws are based on the principles of English common law, case law and local customary law. Islamic law is another important source of law which applies only to the Muslim population and is governed by a separate system of courts (Syariah Courts). The Malaysian system retains many of the English systems characteristics, but has become increasingly influenced by the laws of other Asian jurisdictions. For example, conveyance practice has moved towards an Australian registration system while Malaysias Contracts Act is modelled after the Indian system.
2.2 systeM oF governMent in Malaysia
Malaysia is a constitutional monarchy, headed by the King, who is customarily referred to as the Yang di-Pertuan Agong. The Yang di-Pertuan Agong is elected for a 5-year term from among the 9 Sultans of the states in Peninsular Malaysia. The Yang di-Pertuan Agong is also the leader of the Islamic faith in Malaysia. Malaysia practices parliamentary democracy and has a 3-tier Government structure: Federal, State and Local. A General Election is held every 5 years. Federal executive power is vested in the Cabinet, led by the Prime Minister. The Federal Constitution of Malaysia requires the Prime Minister to command the confidence of the majority in the lower house of Parliament. The Cabinet is chosen from among members of Parliament and is collectively responsible to that body. Legislative power is divided between Federal and State legislatures. Parliament makes federal laws applicable to Malaysia as a whole. It also examines the Governments policies, approves the Governments expenditure and new taxes and also serves as the forum for criticisms and the focus of public opinion on national affairs. The State Governments are headed by State Rulers. Each Ruler acts on the advice of the relevant State Executive Council that is chaired by the Chief Minister (or Menteri Besar). All states have their own legislatures. Further information on the machinery of the Malaysian Government can be obtained at http://www.gov.my/MyGov/BI/Misc/GovMachinery.
2.3 distribution oF powers between the Federal, state and local governMents
The distribution of executive and legislative powers between the Federal and State Governments is embodied in the Federal Constitution of Malaysia. The Federal Government has authority over, among others, external affairs, defence, internal security, civil and criminal law and the administration of justice (except civil law cases among Malays or other Muslims which are adjudicated under Islamic law), federal citizenship, finance, trade, commerce, industry, shipping, communications, transportation, power, education, medicine, health, labour and tourism. pg. 25
The State Governments have, in their respective States, authority over, among others, land, Local Government and services of a local character such as markets, fairs and licensing of places of public amusement. Both the Federal and State Governments have concurrent jurisdiction over social welfare, town and country planning, public health, sanitation, drainage, irrigation, as well as housing and provision for housing accommodation, among others. As in most countries, Malaysian local authorities carry out urban management functions including planning and building control and general maintenance functions of urban infrastructure.
2.4 independence oF the Judiciary
A key feature of the Malaysian legal system rests in the independence of the Judiciary from the Executive. This principle is embodied in the Malaysian Constitution.
2.5 Malaysian court systeM
The structure of the Malaysian Court System is similar to that of other Commonwealth countries, comprising Superior Courts and Subordinate Courts. The profile of each of these is briefly outlined below: 2.5.1 Superior Courts The Superior Courts comprise the Federal Court, the Court of Appeal and the High Courts, the Federal Court being the highest court in the country. The High Courts oversee and have general jurisdiction over matters heard in the Subordinate Courts in relation to both civil and criminal matters. As regards civil matters, the High Court must hear matters involving claims of over RM250,000. Such claims cannot be heard in the Subordinate Courts. Appeals against decisions of the High Court (on both civil and criminal matters) are heard by the Court of Appeal. In certain instances, the leave of the Court of Appeal must first be obtained. The Federal Court deals with appeals from the Court of Appeal on both civil and criminal matters. In cases involving criminal matter, the Federal Court will only hear the appeal where the case originated at the High Court. 2.5.2 Subordinate Courts The Subordinate Courts comprise the Magistrates Courts and the Sessions Courts. The Magistrates Courts hear all civil matters in respect of claims which do not exceed RM25,000. For criminal matters, the Magistrates have the authority to try all criminal cases where the offences involve a maximum term of imprisonment of 10 years. The Sessions Courts have authority to hear all civil matters where the claims are between RM25,000 - RM250,000. However, the jurisdiction of the Sessions Court is unlimited in relation to matters involving landlord and tenant issues and motor vehicle accidents. As regards criminal matters, the Sessions Courts have the authority to hear all criminal matters except those involving capital punishment. Additionally, there are Syariah Courts which operate independently of the above Court System in relation to matters involving Islamic laws and Muslims. These courts do not have jurisdiction over non-Muslims.
pg. 2
Chapter 3 Business Environment

3.1 a snapshot oF the current econoMic situation and proJected econoMic growth 3.2 the ninth Malaysia plan (9Mp) and third industrial Master plan (iMp3) 3.2.1 ThE NINTh MALAySIA PLAN (9MP) 3.2.2 ThE ThIRD INDuSTRIAL MASTER PLAN (IMP3)
3.3 inFlation rate 3.4 interest rate 3.5 knowledge workers
malaysIa has undergone tremendous economIc transformatIon over the years to emerge as one of the fastest-growIng economIes In the regIon
business environment
chapter 3
Business Environment
a snapshot oF the current econoMic situation and proJected econoMic growth
3.1
Malaysia has gone through tremendous economic transformation which helped the country to make great strides in socio-economic development over the last 40 years. During the 1970s and 1980s, Malaysia was predominantly a commodity-based economy. The agriculture and mining sectors accounted for more than 1/3 of real gross domestic product (GDP) and over 3/4 of total exports. In the late 1980s, Malaysia took several critical steps to essentially diversify the structure and strengthen the resilience of the economy as well as diversify the countrys exports. Hence the source of foreign exchange earnings. These included liberalising foreign investment in manufacturing industry and opening up the trade sector, supported by development and modernisation of enabling physical infrastructure, plus attractive tax and non-tax incentives. These moves served as catalysts that propagated the industrialisation of the Malaysian economy, driven by export-oriented foreign direct investment (FDI) into the manufacturing sector. Consequently, Malaysias real GDP growth hit a high of 9.5% per annum between 1990 and 1996, compared with the average of 7% per annum in the preceding two decades. This in turn has steadily raised the manufacturing sectors contribution to the Malaysian economy over the past 20 years in terms of its share of output and exports to more than 30% and 80% presently, from just 10% of real GDP and 20% of total gross exports back in 1970. Thanks to this successful structural shift in the Malaysian economy, the countrys per capita income is now around RM21,000 (USD5,700) from just over RM1,000 (USD350) back in 1970.
Malaysia: real gdp growth (% p.a.)
1970- 1980- 1990- 200079 89 99 06 Real GDP Manufacturing Services Agriculture Mining Construction Private Consumption Government Consumption Fixed Capital Formation 8.2 14.4 9.0 6.7 7.7 8.6 6.7 9.5 13.8 5.9 9.4 7.1 3.5 3.5 3.4 4.8 6.0 7.6 N/A N/A 7.2 10.0 9.1 0.2 4.6 9.0 5.7 6.0 8.5 12.7 12.5 5.5 7.0 5.9 3.9 1.6 0.7 7.7 8.1 6.2 7.3 9.1
1h 2007 5.6 1.8 9.4 0.6 3.4 4.4 10.8 8.8 8.1 2.5 2.4
2007 3.1 9.0 3.1 3.3 5.2 9.0 10.8 10.8 4.1 6.2
2008 3.8 8.6 3.5 4.0 6.3 7.9 5.5 5.0 5.7 6.6
9Mp 6.0 6.7 6.5 5.0 3.4 3.5 6.9 5.3 7.9 7.1 7.9
iMp3 6.3 5.6 7.3 5.2 3.4 5.7 N/A N/A N/A N/A N/A
6.0 6.0-6.5
Exports (Goods & Services) N/A Imports (Goods & Services) N/A
9MP covers the period 2006 - 2010 IMP3 covers the period 2006 - 2020 Source: ank Negara Malaysia, Department of Statistics, Ministry of Finances Economic Report 2007/2008, B 9MP, IMP3
pg. 2
Malaysia: share oF real gdp (%)
1970 Manufacturing Services Agriculture Mining Construction Private Consumption Government Consumption Fixed Capital Formation Exports (Goods & Services) Imports (Goods & Services) 10.3 38.3 26.0 13.8 4.2 64.6 13.7 21.7 N/A N/A
1980 17.6 42.5 21.0 12.1 4.7 54.9 11.0 34.1 N/A N/A
1990 25.6 47.6 14.9 9.0 3.7 52.2 13.4 33.9 72.4 71.3
2000 1h2007 30.9 49.3 8.6 10.6 3.9 43.8 10.2 25.3 119.8 100.6 30.3 53.3 7.5 8.7 3.0 50.8 11.1 23.7 119.3 104.9
2010 32.4 59.2 7.8 5.9 2.4 52.1 14.3 29.2 126.9 122.4
2020 28.5 66.5 7.0 4.4 2.5 N/A N/A N/A N/A N/A
Source: ank Negara Malaysia, Department of Statistics, 9MP, IMP3 B
Malaysia: real gdp growth & per capita incoMe

25,000 21,000 17,000 5 13,000 0 9,000 5,000 1,000 1991 1994 1997 1970 1979 2000 2003 1973 1976 1985 1982 1988 rM 2006 (5) 15
10
(10) %
GDP per Capita (RhS)
Real GDP (LhS)
Source: ank Negara Malaysia Annual Report 2006, Department of Statistics B
pg. 30
Malaysia: approved ManuFacturing investMent & Fdi

50 8
40 rM (billion)
6 usd (billion)
30 4 20 2
10 0 1990 1994 1996 1986 1992 1998 2000 2002 1980 1982 1984 2004 1988 2006
Approved Manufacturing Investment (LhS)

Source: IDA, UNCTAD M
FDI (RhS)
Malaysia: share oF total exports (%)

100 80 60 40 20 0 1970 Manufacturing 1980 1990 Commodities 2000 1h 2007
Source: ank Negara Malaysia, Department of Statistics B
Post-Asian financial crisis in 1997-1998, the Malaysian economy recorded a respectable growth of 5.5% per annum up to the year 2006. Real GDP growth was sustained at 5.6% in the first 6 months of 2007, driven mainly by the robust growth in the services sector on the back of strong domestic consumption expenditure especially consumer spending. In addition, the construction sector is recovering, driven by higher Government spending on infrastructure and specific policy initiatives for the property sector. The high-end residential market in particular is flourishing. Performance in the first half of 2007 implies that the Malaysian economy is on the right track to achieve real GDP growth of 6% per annum up to 2010. For 2007-2008, the Malaysian economy is expected to expand by between 6% and 6.5%. Growth will be driven largely by domestic demand consumer, business and Government spending this translates into continued robust growth for the services sector and sustained recovery for the construction sector. At the same time, the mining sector is expected to benefit from higher investment and output from the oil & gas industry current up-cycle with the commencement of the development & production phase after the earlier exploration & discovery stage.
pg. 3
Overall, the Malaysian economic growth performance in the post-Asian financial crisis period indicates that the Governments efforts to further reinvent the economy are bearing fruit and producing the desired results. The latest phase of economic restructuring is principally in terms of: moving up the value-added and technology ladders as well as broadening the supply chains in existing growth areas, namely the manufacturing sector and resource-based industries such as oil & gas promoting and developing new growth areas such as tourism, Islamic finance and distributive trade services as well as biotechnology
3.2
the ninth Malaysia plan (9Mp) and third industrial Master plan (iMp3)
Underpinning the Governments policies in charting the future growth path and development course for the Malaysian economy are the Ninth Malaysia Plan (9MP, 2006-2010) and the Third Industrial Master Plan (IMP3, 2006-2020). 3.2.1 The Ninth Malaysia Plan (9MP, 2006-2010) The 9MP, unveiled in March 2006, marked the start of the final 15-year phase for Malaysia to complete its mission and achieve the target of becoming a fully developed nation by the year 2020. Underlying the 9MP are 5 thrusts as the guiding principles to lay the foundations and pave the way for economic growth and development. These are: Moving the Malaysian economy up the value-added chain. This, among others, entails up-scaling value-added manufacturing and manufacturingrelated service industries; strengthening the role and contribution of the agriculture and agro-based industries; income, employment and trade; promoting the services sector especially tourism, finance and distributive trade as a vibrant source of growth; mainstreaming information and communications technology (ICT); and promoting new growth areas like biotechnology. raising the capacity for knowledge and innovation and nurturing a firstclass mentality, principally by enhancing human capital development via investments and reforms in the education system, skills training and upgrading programmes; harnessing science, technology and innovation to promote research & development (R&D) activities and raising knowledge content in the economy; and empowering women and youth. a ddressing the persistent socio-economic inequalities constructively and productively. This is underpinned by a continued commitment to eradicate poverty, promote fair income and wealth distribution, and close the rural-urban and interstate development gaps via more balanced investment and economic growth across the country. In this regard, regional economic blueprints are of significant importance, of which the ones for Southern Johore (the Iskandar Development Region or Iskandar) and the northern States of Penang, Kedah, Northern Perak and Perlis (Northern Corridor Economic Region or NCER) have already been unveiled. The development master plans for the Eastern Corridor States (Kelantan, Terengganu and Pahang) and East Malaysia (Sabah and Sarawak) are expected to be announced by the end of this year. i proving the standard and sustainability of quality of life by improving m and upgrading infrastructure, utilities, housing, urban transportation and health services as well as managing and protecting the environment.
pg. 32
s trengthening the institutional and implementation capacity, namely via an efficient public service delivery system and good governance. Substantial progress has been made on this front. The establishment of a Special Taskforce to Facilitate Business (PEMUDAH) resulted in improvements in the approval procedures for the property sector; shortening the time frame for tax refund (to 14 - 30 days from 1 year), registration of new businesses (to 1 hour from 3 days), processing of expatriate work permit applications (to 7 days from 14 days), approving the Environmental Impact Assessment (EIA) report for business licensing (to 5 weeks from 3 months); and the introduction of online applications and approvals for business licensing in the manufacturing sector i.e. Business Licensing Electronic Support system (BLESS).
In ensuring the progress towards achieving the National Mission, the Government has allocated a total of RM200 billion for development spending under the 9MP (8MP, 2001-2005: RM170 billion) plus another RM595.5 billion for operating expenditure (8MP: RM396.7 billion).
gdp by industry origin 2000 - 2010
gdp by industry origin Agriculture, Forestry, Livestock & Fishing Mining & Quarrying Manufacturing Construction Services: Government Services Business & Non-Government Services Electricity, Gas & Water Transport, Storage & Communications Wholesale and Retail Trade, Hotels and Restaurants Finance, Insurance, Real Estate and Business Services Other Services GDP
target 2.0% 2.9% 4.0% 2.5% 5.2% 4.5% 5.3% 5.8% 5.8% 3.6% 7.0% 5.0% 4.2%
8Mp achieved 3.0% 2.6% 4.1% 0.5% 6.1% 6.7% 6.0% 5.6% 6.6% 4.3% 8.1% 4.8% 4.5%
9Mp target 5.0% 3.4% 6.7% 3.5% 6.5% 4.5% 6.7% 5.9% 6.7% 6.8% 7.0% 6.6% 6.0%
Source: 9MP
gdp by expenditure 2000 - 2010
gdp by expenditure Consumption Private Public Gross Fixed Capital Formation Private Public Exports Imports GDP
target 6.1% 5.2% 9.4% 0.9% -2.3% 3.8% 2.0% 1.9% 4.2%
8Mp achieved 7.4% 6.6% 10.2% 1.6% -1.0% 3.9% 5.2% 5.6% 4.5%
9Mp target 6.5% 6.9% 5.3% 7.9% 11.2% 5.0% 7.1% 7.9% 6.0%
Source: 9MP
pg. 33
3.2.2 The Third Industrial Master Plan (IMP3) The 9MP is complemented by the IMP3 that seeks to strengthen Malaysias global competitiveness through the transformation, development and promotion of the manufacturing, services and agriculture sectors. The 10 strategic thrusts of the IMP3 are: Enhancing Malaysias position as a major trading nation Generating investment in targeted growth areas Integrating Malaysian companies into regional and global supply chains and networks Ensuring industrial growth contributes towards equitable distribution and more balanced regional development Sustaining the manufacturing sectors contribution to growth via targeted nonresource based industries (E&E, medical devices, textiles & apparel, machinery & equipment, transport equipment, metals) and resource-based industries (petrochemicals, pharmaceuticals, wood-based, rubber-based and oil-palm based and food processing) Positioning the services sector as a major source of growth by promoting and developing targeted service industries (business & professional services, integrated logistics, tourism, education & training, healthcare, ICT, distributive trade, construction services) Facilitating the development and application of knowledge-intensive industries Developing innovative and creative human capital Strengthening the role of private sector institutions, including trade and industry associations Creating a more competitive business operating environment through effective institutional support and an efficient Government delivery system
With the implementation and execution of the 9MP and IMP3, the Malaysian economy is projected to grow by 6.3% per annum between 2006 and 2020, on the basis of: a global real GDP growth of 3.5% per annum a sustained manufacturing sector growth momentum the services sector becoming a new major source of growth and exports the enhanced role and contribution of the agriculture sector to growth and exports quality investments by both private sector and Government-linked companies the greater efficiency and effectiveness of the public sector delivery system
pg. 34
3.3
inFlation rate
Malaysia has been able to achieve sustained economic growth over the years with a relatively stable inflation environment. Between 1970 and 2006, real GDP growth of 6.8% per annum was accompanied by an average inflation rate measured by the Consumer Price Index (CPI) of 3.8%. By and large, periods of high inflation rates in Malaysia are externally induced, namely the first and second oil price shocks in the early 1970s and early 1980s, as well as the currency devaluations during the Asian financial crisis of 1997-1998. Excluding these specific episodes of high-inflation periods, Malaysias inflation rate has averaged at just 2.8% over the long term. For the first 7 months of 2007, inflation rate averaged 2%, down from 3.6% last year, and is expected to be within the 2%-2.5% range for the full year. The easing of inflationary pressures mainly reflects the Governments decision to maintain fuel subsidies and hence keep domestic retail fuel prices stable.
inFlation rate trend in Malaysia

7.0 6.0 5.0 4.0 3.0 2.0 1.0 % Jan-91
Source: CEI C
Average 3.0%
Jan-94
Jan-97
Jan-00
Jan-03
Jan-06
3.4
interest rate
As regards interest rates, the movements of key interest rates such as the base lending rate, the 3-month KLIBOR and 3-month fixed deposit rate has largely been in tandem with the inflation rate. This reflects the monetary policy objective of promoting price stability and sustainable economic growth. Given the near-term outlook of stable and low inflation rate and amidst ample domestic liquidity, interest rates are largely expected to remain stable. Meanwhile, Malaysias exchange rate has completed a full circle. Before June 1972, the Malaysian Ringgit was pegged to the British Pound Sterling. Then, it was briefly pegged to the US Dollar before floating in June 1973. Under the flexible exchange rate regime, the Malaysian Ringgit was monitored against a basket of currencies of Malaysias major trading partners and major currencies used in international settlements. However, from time to time, the Central Bank, Bank Negara Malaysia, intervened in the foreign exchange market to ensure an orderly movement and to prevent excessive volatility in the currency, especially with the liberalisation of the economy that resulted in increased capital flows, including short-term capital. pg. 35
As a result, the Malaysian Ringgit moved within a fairly narrow range against the US Dollar over a 20-year period up to 1996. However, excessive volatility and speculation in the currency and capital markets during the 1997-1998 Asian financial crisis necessitated the reversal in Malaysias exchange rate regime. The Malaysian Ringgit was pegged to the US Dollar at RM3.80 and selective capital controls were introduced in September 1998 as temporary measures that essentially aimed to provide a stable environment for consolidation, restructuring and reform, especially in the balance sheets and operations of the banking and corporate sectors, after which the selective capital control measures were eventually removed. The Malaysian Ringgit was finally de-pegged from the US Dollar in July 2005, bringing currency back to managed floating.
Malaysia: annual inFlation rate (%)

18 15 12 9 6 3
1990
1994
1974
1996
1986
1992
1972
1970
1978
1998
2000
2002
1976
1982
1980
1984
2004
Source: ank Negara Malaysia, Department of Statistics B
Malaysia: interest rates (% p.a.)

15 12 9 6 3 % 1990 1994 1996 1986 1992 1998 2000 2002 1980 1982 1984 2004 1988 2006
Base Lending Rate

Source: ank Negara Malaysia B
3-mth KLIBOR
3-mth FD Rate
pg. 3
2006
1988
Malaysia: end-period exchange rate (rM per usd)

4.00 3.75 3.50 3.25 3.00 2.75 2.50 2.25 2.00 1990 1994 1974 1996 1986 1992 1972 1998
2000
1978
2002
1970
2004
1980
1982
1984
Source: ank Negara Malaysia B
3.5
knowledge workers
To meet the needs of the economy and the growth plans under the 9MP and IMP3, it is crucial that Malaysia has a sufficient supply of knowledge workers. In the 9MP, the labour force in Malaysia is projected to increase by 10% in 2010 (as compared to the labour force in 2005) to achieve the targeted labour force of 12.4 million persons. Based on these statistics, it is anticipated that the labour force in Malaysia would make up more than 40% of the total population by 2010. In line with the greater focus on human capital development: a total of RM45 billion will be allocated during the 9MP period to implement various education and training programmes; and the Government through concerted efforts with the local education industry players has established new universities, university colleges, branch campuses, polytechnics and community colleges. In addition, the capacity of existing local universities has been expanded to provide greater access to higher education in order to increase the supply of knowledge workers.
tertiary education institutions1, 2000 & 2005
1988
institution public University University College Polytechnic Community College total private University University College Branch Campus College total total
2000 11 0 11 0 22 5 0 3 632 640 662
2005 11 6 20 34 71 11 11 5 532 559 630
Source: inistry of Higher Education M Notes: efers to University, University R College, Branch Campus, College, Polytechnic and Community College.
2006
1976
pg. 3
The supply of knowledge workers currently comes from an existing pool of experienced workers as well as graduates from various tertiary institutions in Malaysia, including a large number of foreign students currently pursuing tertiary education in the country. The Government allows importation of knowledge workers in areas where skills are not sufficiently available in the relevant industries.
enrolMent in tertiary education institutions by levels oF study, 2000 - 2010
nuMbers oF students average annual growth rate (%)
level of study
public
2000
private total public
2005
2010
private total
2001-2005 public private
Certificate Diploma First Degree Masters PhD total
23,816 81,754 91,398 117,056 170,794 59,932 24,007 2,174 3,359 131 313,374 261,047
105,570 37,931 94,949 132,880 141,290 208,454 98,953 131,428 230,381 285,690 230,726 212,326 110,591 322,917 293,650 26,181 34,436 4,202 38,638 111,550 3,490 6,742 140 6,882 21,410 574,421 390,388 341,310 731,698 853,590
143,480 188,680 134,550 5,770 270 472,750
284,770 474,370 428,200 117,320 21,680 1,326,340
9.8 1.6 4.4 7.5 15.0 4.5
3.0 2.3 13.0 14.1 1.4 5.5
30.1 23.6 6.7 26.5 26.0 16.9
8.6 7.5 4.0 6.5 14.0 6.7
Source: Ministry of Higher Education
output oF skilled and seMi-skilled huMan resources by course, 2000 - 2010

nuMbers oF trainees average annual growth rate (%)
course
public
2000
2005
2010
private total
Engineering Mechanical Electrical Civil Building Traders Information & Communications Technology Others total
16,428 9,606 5,234 1,588 1,417
9,730 2,232 7,378 120 547
26,158 11,838 12,612 1,708 1,964
31,633 17,380 11,677 2,576 2,566
17,337 4,866 12,221 250 1,200
48,970 22,246 23,898 2,826 3,766
56,330 30,966 19,828 5,536 4,232
44,627 100,957 10,608 41,574 33,498 53,326 521 6,057 2,633 6,865
14.0 12.6 17.4 10.2 12.6
12.2 16.9 10.6 15.8 17.0
12.2 12.2 11.2 16.5 10.5
20.8 16.9 22.3 15.8 17.0
903 2,133 20,881
7,520 928 18,725
8,423 3,061 39,606
1,016 3,550 38,765
11,844 2,730 33,111
12,860 6,280 71,876
1,853 9,379 71,794
12,866 14,739 1,630 11,009 61,772 133,566
2.4 10.7 13.2
9.5 24.1 12.1
12.8 21.4 13.1
1.7 -9.8 13.3
Source: Manpower Department, Ministry of Youth and Sports, National Vocational Training Council, Ministry of Agriculture and Agro-Based Industry, Majlis Amanah Rakyat and Construction Industry Development Board Malaysia
Sources: 1 he Ninth Malaysia Plan 2006-2010, Economic Planning Unit, Prime Ministers Department (March 2006) T 2 Bank Negara Malaysia Annual Reports (Various Issues) 3 Economic Reports, Ministry of Finance (Various Issues) 4 The Third Industrial Master Plan 2006-2020 (August 2006)
pg. 3
Chapter 4 Foreign Investment

4.1 Foreign investMent coMMittee (Fic) 4.1.1 BROAD EQuITy POLICy 4.1.2 CQuISITION OF REAL ESTATE/ PROPERTy By FOREIGN PARTIES A
supported by many posItIve factors, malaysIa makes an Ideal destInatIon for foreIgn Investment
foreign investment
chapter 4
Foreign Investment
overview oF Foreign investMent in Malaysia
Malaysia has always encouraged foreign investment. The countrys foreign investment policy falls within the purview of the Economic Planning Unit (EPU) in the Prime Ministers Department. The EPU has a Foreign Investment Committee which oversees foreign investment in the country and implements the relevant foreign investment policies with the assistance of various agencies including Malaysia Industrial Development Authority (MIDA), which coordinates the incentives for these investors.
4.1 Foreign investMent coMMittee (Fic)
Foreign investors must apply to the FIC for approval in respect of certain transactions as set out in the FICs administrative guidelines (FIC Guidelines). These guidelines do not have statutory force, but compliance is encouraged. In practice, the FIC Guidelines are enforced through other Government agencies as a condition to the granting of approvals, etc., particularly where a foreign investor wishes to participate in a government-regulated sector. However, as an integral part of the non-fiscal incentive to attract foreign investment in Iskandar, IDR-status companies located in the approved node within Iskandar will be exempted from all FIC requirements. The FIC Guidelines currently in force are those relating to: The acquisition of properties by local and foreign interests The acquisition of interests, mergers and takeovers by local and foreign interests The FIC Guidelines can be found at http://www.epu.jpm.my. 4.1.1 Broad Equity Policy The broad principle underlying Malaysias foreign investment policy is that foreign parties should not hold more than 70% equity in a Malaysian company, while the remaining 30% should be owned by Bumiputras (who are the indigenous race of Malaysia). For companies whose activities involve areas of national interests such as water and energy supply, broadcasting, defence and security, foreign interest is usually limited to 30%. The above general principle has been gradually relaxed and a 100% foreign equity ownership is permitted in several circumstances. These include the following: New manufacturing companies; Companies granted MSC Malaysia status Companies granted International Procurement Company (IPC) status, Operational Headquarters (OHQ) status and Regional Distribution Centre (RDC) status
pg. 4
4.1.2 Acquisition of Real Estate/Property by Foreign Parties Any acquisition of property by foreign interests requires the approval of the FIC, which will take into account several factors including the following: Foreign interests are only allowed to acquire property valued at more than RM150,000 per unit with no limit on the numbers of property acquired The State Authority has the discretion to consider the acquisition based on the area or location of the property, types of property and percentage of the total units in a project Financing from internal and external sources are allowed for all acquisitions of properties Where foreign interests acquire commercial property for their own use, they are not required to incorporate a company to acquire the property where the property is valued at less than RM10 million Foreign interests are allowed to acquire industrial property without any price limit provided the property is registered under a locally-incorporated company and subject to any other conditions for acquisition Leasing of property for a term of 10 years and above by foreign interests requires the FICs approval Disposals of property by one foreign interest to another foreign interest requires the FICs approval Disposals of property valued at less than RM20 million by foreign interests to local interest does not require the FICs approval, but the latter needs to be notified The charging of Malaysian properties to foreign interests requires the approval of the FIC and will be allowed if the related loan is to be utilised for business operations in Malaysia only
pg. 42
Chapter 5 Banking System

5.1 Financial institutions
5.2 Malaysia as an international islaMic Financial centre 5.3 international oFFshore Financial centre 5.4 capital Market 5.4.1 EQuITy INSTRuMENTS 5.4.2 DEBT SECuRITIES 5.4.3 DERIVATIVES 5.4.4 ISLAMIC INSTRuMENTS
wIth a strong and effIcIent bankIng and fInancIal clImate, malaysIa Is well-posItIoned to become a leadIng fInancIal centre In the regIon
banking system
chapter 5
Banking System
overview oF the banking systeM in Malaysia
The Central Bank, Bank Negara Malaysia (BNM) has been vested with legal powers to regulate the financial system under the Banking and Financial Institutions Act 1989 and formulate a comprehensive banking system in Malaysia. BNM is responsible for maintaining monetary stability and ensuring the smooth and seamless operation of the financial system. BNMs regulatory policies are managed to ensure that these requirements are met. BNM is responsible for the issuance of the Malaysian currency (the Malaysian Ringgit) and acts as a banker/economic/ financial adviser to the Government. In addition, it administers the countrys foreign exchange control regulations.
5.1 Financial institutions
Integral to the Malaysian banking system are the locally-owned commercial banks and locally-incorporated foreign commercial banks. These commercial banks operate via a wide network of branches throughout the country. A few domestic banks have presence in other countries through branches, subsidiaries and joint ventures. In addition, there are 16 foreign banks currently operating in Malaysia, including Citibank, HSBC, Standard Chartered, Al-Rajhi Bank, Deutsche Bank and Kuwait Finance House. Aside from domestic and foreign commercial banks, there are currently more than 10 investment banks operating in Malaysia. These investment banks play an important role in the short-term money market and capital markets. Their activities range from underwriting of borrowings, loans syndication, corporate finance and management advisory services, listing arrangements for Initial Public Offerings (IPOs) as well as investment portfolio management. With the recent momentum to streamline efficiencies and achieve synergy, mergers between merchant banks, stockbroking companies and discount houses have taken place and will continue in the future, thus creating a more efficient, effective and competitive banking sector. Islamic banking is currently a key focus area of the Government, as is explained in more detail below (refer to 5.2). Malaysia also has various financial institutions established with a view to promote development in particular sectors such as agriculture, manufacturing and exports, small to medium-scale enterprises, and others.
5.2 Malaysia as an international islaMic Financial centre
In recent years, it has been acknowledged in the global market that Malaysia has emerged as one of the leading Islamic financial centres due to the concerted and continuous efforts by the Government in developing this sector. At present, there are 11 Islamic banks operating in Malaysia, providing a full range of Islamic financial services. It is also a growing trend for conventional banks to offer Islamic banking facilities and products. In its strategic efforts to make Malaysia a regional hub for Islamic banking, the Government has established the International Islamic Financial Centre (MIFC). The MIFC will focus on the following niche activities: Origination, distribution and trading of Islamic capital market and treasury instruments Islamic fund and wealth management services International currency Islamic financial services (including deposits and financing) Takaful and retakaful pg. 45
The focus of the MIFC is to position Malaysia as a centre of excellence for Islamic banking and finance, education, training, consultancy and research. To attract more players into the realm of the Malaysian Islamic financial system, several measures have been taken by the Government including: New licences will be issued under the Islamic Banking Act 1983 to qualifying foreign and Malaysian financial institutions, permitting such institutions to undertake the full range of Islamic banking business with non-residents and residents in international currencies. Such approved entities will enjoy a tax exemption for 10 years on income from businesses undertaken in international currencies. New licences will be issued under the Takaful Act 1984 to qualifying foreign and Malaysian financial institutions to undertake the full range of takaful business with non-residents and residents in international currencies. Such entities will also enjoy a similar tax exemption. Labuan offshore Islamic banks, offshore Islamic investment banks, offshore takaful companies and Islamic divisions of offshore banks and offshore insurance companies will be allowed to establish operating offices anywhere in Malaysia, thereby granting such entities greater flexibility to carry out their businesses and opportunity to penetrate the Malaysian market. Up to 49% foreign equity in Malaysian Islamic banks and takaful operators will be allowed. Fund managers licensed under the Securities Industry Act 1983 will be given 100% income tax exemption on management fee income for 10 years (from year of assessment 2007 until year of assessment 2016) for managing funds of foreign investors, based on Syariah principles. It has been proposed in the 2008 Budget that similar tax exemption be given on fees received from managing Islamic funds for local investors from year of assessment 2008 to year of assessment 2016.
In March 2006, Malaysia has established the International Centre for Education in Islamic Finance (INCEIF) to develop talents including professionals and specialists in Islamic finance who are much needed to sustain market competitiveness and meet future challenges in the Islamic financial industry. BNM has established an endowment fund of RM500 million to support this initiative. INCEIF will offer professional certification programmes in Islamic finance by adopting unique pedagogical approaches and the latest teaching techniques in supplying a stream of knowledge and skills. INCEIF will also forge strategic alliances with domestic and foreign academic institutions to offer post-graduate programmes, namely Masters and Doctorates in Islamic Finance with specific areas of specialisation.
5.3 international oFFshore Financial centre
The Malaysian Government established a fully-integrated International Offshore Financial Centre (IOFC) in October 1990. The IOFC is based in Labuan, an island off the coast of East Malaysia. The IOFC was established with the aim of enhancing the attractiveness of Malaysia as an investment centre, to complement and supplement the onshore financial sector in Kuala Lumpur. There are presently over 50 offshore banks operating in the IOFC. The IOFC has been developed with infrastructure facilities comparable to other established offshore financial centres. As part of Malaysia, the IOFC enjoys political stability as well as relatively low costs of operation and similar time zone with other major Asian cities. The IOFC offers various financial products and services to investors globally, including banking and investment banking, insurance, captive insurance, fund management, Islamic financing, etc. Offshore entities in the IOFC are required to transact in foreign currency and there are limitations with respect to business dealings with Malaysian residents.
pg. 4
banking system
However, offshore banks are permitted to borrow and lend money to Malaysian residents, as well as extend loans to foreigners for the purpose of acquiring real estate in Malaysia. The offshore entities are governed by a separate set of offshore legislation, distinct from that governing Malaysian entities. Companies in the IOFC deriving offshore trading income enjoy preferential tax treatment with the option of being taxed at 3% of net audited profits or paying a tax of RM20,000. However, as proposed in the 2008 Budget, an IOFC entity may elect for its income from offshore business activities to be taxed under the Income Tax Act 1967. The offshore entities are regulated by the Labuan Offshore Financial Services Authority (LOFSA) which was set up on 15 February 1996 as a single regulatory body. LOFSA works closely with BNM and the Ministry of Finance to implement policies that facilitate a competitive and attractive offshore business environment. Over the years, a greater convergence with the domestic banking sector has been achieved.
5.4 capital Market
Capital market in Malaysia is regulated by the Securities Commission (SC), which was established in 1993. The SC is a statutory body which is self-funding and has both enforcement and investigative powers. It reports to the MOF and has responsibility for the regulation and development of the capital market as a whole, with specific responsibility over several areas including the following: Offering and issuance of securities by public companies Issuance of debentures by private companies Listing of securities on Bursa Malaysia (the Malaysian Stock Exchange) Matters relating to mergers and takeovers of Malaysian companies Unit trust schemes and real estate investment funds The Malaysian capital market allows the Government and corporations to raise funds through the following: Equity instruments Debt securities Derivatives Islamic instruments The following is a brief overview of each of these instruments: 5.4.1 Equity Instruments Equity instruments in Malaysia comprise shares which can be listed on Bursa Malaysia. Bursa Malaysia consists of a Main Board, a Second Board and the Malaysian Exchange of Securities Dealing and Automated Quotation (MESDAQ). Currently, Bursa Malaysia is one of the largest bourses in ASEAN with a listing of over 1,000 Malaysian companies with total market capitalisation of approximately RM700 billion. Equity instruments also include warrants and unit trusts. 5.4.2 Debt Securities Debt securities are generally fixed income instruments which can be traded either on the primary (listed) or secondary (over the counter) market. In Malaysia, debt instruments generally take the form of bonds or a variation of these, and such instruments can be issued by the Government or the private sector. Government Bonds typically include the following: BNM Monetary Notes Malaysian Treasury Bills Malaysian Government Securities Khazanah Bonds (which are guaranteed by the Government)
pg. 4
Private bonds or similar instruments include some of the following: Corporate Bonds e.g. straight bonds, bonds with warrants and convertible bonds these are usually long-term securities issued by corporations to meet longer term financing requirements Medium-Term Notes these would normally have a maturity period of 1 to 5 years Cagamas Instruments Commercial Papers these would normally have a tenure of 1 to 12 months Asset-backed Securities
The above instruments may also be issued under Islamic principles in compliance with Syariah principles. 5.4.3 Derivatives The raising of funds through debt securities in Malaysia generally comprises the trading of futures and options, which are essentially products whose value is dependent on, or derived from the value of underlying instruments. Derivative instruments are typically futures and options and are generally traded on Bursa Malaysia or over the counter. A futures contract is an agreement between two parties to buy or sell the underlying instrument at a certain date in the future, at a specific price, An option provides the holder or buyer the right, but not the obligation, to purchase or sell a certain quantity of the underlying instrument at a stipulated price within a specific time period by paying a premium. 5.4.4 Islamic Instruments Islamic instruments are widely used in Malaysia to raise financing for both the Government and private sectors. These instruments are issued in strict compliance with Syariah principles and are increasingly used by Malaysian entities as a source of financing. There are a wide range of Islamic banking products and services available in Malaysia through both Islamic and conventional banks, and these are generally based on the following concepts: Fund-based: - Bai Bithaman Ajil - Tawarruq/Murabahah - Bai Inah - Mudharabah - Wakalah - Musyarakah - Rahnu (Qard and Wadiah Yad Dhamanah) - Ijarah - Rahnu (Qard) - Qard - Hiwalah - Bai Dayn - Variable Rate Bai Bithaman Ajil - Istisna Fee-based: - Murabahah - Bai Dayn - Kafalah Wakalah Ijarah Bai Bithaman Ajil
The Malaysian Government continues to provide various tax incentives to further promote the use of Islamic financing in the country. Further, a USD57 million endowment fund has been established to create a pool of Syariah experts in Islamic finance and promote research and development to spur innovation in Islamic financial products and services. pg. 4
Chapter Exchange Controls

6.1 exchange control 6.1.1 ExTERNAL ACCOuNTS 6.1.2 FOREIGN CuRRENCy ACCOuNTS 6.1.3 REPATRIATION OF PROFITS TO FOREIGN ShAREhOLDERS 6.1.3.1 DISTRIBUTION OF DIVIDENDS 6.1.3.2 PAYMENT OF FEES 6.1.3.3 VOLUNTARY LIQUIDATION/CAPITAL REDUCTION 6.1.4 FOREIGN CREDIT FACILITIES 6.1.5 PROVISION OF CREDIT FACILITIES TO NON-RESIDENTS 6.1.5.1 FOREIGN CURRENCY CREDIT FACILITIES 6.1.5.2 RINGGIT CREDIT FACILITIES 6.1.6 IOFC ENTITIES
6.2 Foreign exchange adMinistration policy For iskandar
the purpose of the foreIgn exchange admInIstratIon polIcy Is to monItor capItal flow Into and out of the country wIth a vIew to preservIng malaysIas fInancIal and economIc stabIlIty
exchange controls
chapter 6
Exchange Controls
exchange control and repatriation oF Funds exchange control
6.1
Malaysia has a liberal foreign exchange administration policy. The purpose of the foreign exchange administration policy is to monitor capital flow into and out of the country with a view to preserving Malaysias financial and economic stability. The foreign exchange policies were tightened during the Asian financial crisis in the late 1990s but have since been progressively liberalised and simplified. The Exchange Control Act 1953, together with Exchange Control Notices of Malaysia (ECMs) made pursuant to this Act, set out the regulatory framework for the Malaysian exchange control regime. The ECMs set out clearly the types of transactions that require approval from BNM, those which can proceed without approval, as well as those for which approval is automatically granted, but for which notification is required. For exchange control purposes, a resident is defined as: A citizen of Malaysia excluding a person who has obtained permanent residence in a territory outside Malaysia and is residing outside Malaysia; A non-citizen of Malaysia who has obtained permanent residence status in Malaysia and is residing permanently in Malaysia; or A person, whether body corporate or unincorporated, whether head office or branch, incorporated or registered with, or approved by any authority in Malaysia.
The following sets out some of the more pertinent exchange control policies: 6.1.1 External Accounts An External Account is a ringgit-denominated account belonging to a non-resident or where the beneficiary of the funds in the account is a non-resident. A nonresident may open and maintain any number of External Accounts with any licensed onshore financial institutions in Malaysia with no restriction on the amount of ringgit funds retained in such accounts. The ringgit funds in an External Account can be used for payments to residents for the purchase of ringgit assets or services provided in Malaysia. Funds in the External Account can be converted into foreign currency with licensed onshore banks and repatriated at any time. 6.1.2 Foreign Currency Accounts Non-residents are permitted to open and maintain any number of foreign currency accounts (FCAs) to retain any amount of foreign currency receipts with Malaysian licensed onshore banks, licensed offshore banks in Labuan and overseas banks. Funds in the accounts may be used for any purpose and can be converted into ringgit with licensed onshore banks or may be repatriated at any time.
pg. 5
A resident exporter may open an FCA with licensed onshore banks to retain any amount of foreign currency export receipts. Resident individuals or companies may convert ringgit into foreign currency and credit this into an FCA onshore or offshore. Conversions of ringgit funds must comply with the requirements in relation to investments in foreign currency assets. 6.1.3 Repatriation of Profits to Foreign Shareholders Non-residents are free to repatriate capital, profits and income earned from Malaysia including salaries, wages, royalties, commissions, fees, rental, interest, profits or dividends. Corporations can repatriate profits in several ways, including the following: 6.1.3.1 Distribution of Dividends Dividends can be distributed out of retained profits to shareholders (including foreign shareholders) without any withholding taxes. However, as Malaysia operates a dividend imputation system, payment of dividends is subject to the availability of dividend franking credits. The absence of dividend franking credits will result in a tax charge on the paying company. Where the company enjoys certain tax incentives, tax exempt dividends may be paid out of exempt profits without the need for franking credits. In this instance, where the shareholder is a Malaysian resident company, it will be able to on-distribute these dividends as tax exempt dividends to its shareholders (i.e. a two-tier tax exempt dividend distribution system). As proposed in the 2008 Budget, the dividend imputation system will be replaced by a single tier system, effective from the year of assessment 2008. Under the single tier system, tax on a companys profits is a final tax and dividends distributed to shareholders will be exempt from tax. 6.1.3.2 Payment of Fees Profit repatriation can also be achieved through the payment of fees, e.g. technical or management fees, interest, royalties, etc. It should be noted however, that such payments may be subject to withholding taxes. Further, all such payments would need to be made at an arms length basis to satisfy the tax authorities that such related party transactions do not involve any transfer pricing element. Voluntary Liquidation/Capital Reduction Upon liquidation of a company or upon a capital reduction exercise (which must be sanctioned by a court of law), capital can be returned to shareholders without any tax implications.
6.1.3.3
pg. 52
exchange controls
6.1.4 Foreign Credit Facilities Resident companies (on a corporate group basis) are permitted to obtain up to RM100 million worth of foreign credit facilities from licensed onshore banks, nonresidents or through the issuance of onshore foreign currency bonds. Individuals are permitted to borrow up to the equivalent of RM10 million worth of foreign currency, which can be used for any purpose. 6.1.5 Provision of Credit Facilities to Non-Residents Residents are permitted to provide the following credit facilities to non-residents: 6.1.5.1 Foreign Currency Credit Facilities Onshore licensed banks may extend credit facilities in foreign currency to non-residents for any purpose including credit facilities to finance or refinance the purchase or construction of residential and commercial property in Malaysia except for the purchase of land (also refer to the FIC guidelines in Chapter 4). Resident corporations are permitted to grant foreign currency credit facilities as follows: - Any amount if funded from own foreign currency funds placed onshore or offshore Any amount through the conversion of ringgit, provided the resident corporation does not have domestic ringgit credit facilities A resident corporation with domestic ringgit credit facilities can lend up to RM50 million on a corporate group basis per calendar year through conversion of ringgit Up to the full amount of proceeds arising from an IPO on the Malaysian stock exchange or foreign stock exchanges
6.1.5.2
Ringgit Credit Facilities Licensed onshore banks are permitted to grant up to RM10 million for use in Malaysia All residents are allowed to extend any amount of credit facilities in ringgit to non-residents to finance or refinance the purchase or construction of any immovable property in Malaysia (excluding purchase of land only) A non-bank resident may extend credit facilities in ringgit to a nonresident not exceeding RM10,000 for any purpose
pg. 53
6.1.6 IOFC Entities There is a specific Exchange Control Notice for IOFC entities (i.e. ECM 15). IOFC entities are viewed as non-residents and generally, the rules are more flexible allowing such entities to carry out the following: Obtain any amount of foreign currency credit facilities Invest any amount in foreign currency assets Enter into foreign exchange contracts involving foreign currencies with licensed onshore banks, licensed offshore banks and any overseas counterparty Buy or sell foreign currency (other than the currency of the State of Israel) against ringgit with licensed onshore banks for permitted purposes Maintain External Accounts with licensed onshore banks to facilitate the defrayment of statutory and administrative expenses in Malaysia Receive payments in ringgit from residents arising from fees, commissions, dividends or interest from deposit of funds with onshore financial institutions Transact in ringgit financial products with licensed onshore banks or resident brokers for its own account or on behalf of its non-resident clients
6.2
Foreign exchange adMinistration policy For iskandar
As an incentive to promote Iskandar, IDR-status companies, approved developers and approved development managers are given flexibilities under the foreign exchange administration rules (refer Chapter 12.3 for further details).
pg. 54
Chapter 7 Structure of Business Entities

7.1 coMpanies incorporated in Malaysia 7.1.1 FORMS OF COMPANIES 7.1.1.1 COMPANIES LIMITED BY SHARES 7.1.1.2 COMPANIES LIMITED BY GUARANTEE 7.1.1.3 COMPANIES LIMITED BY BOTH SHARES AND GUARANTEE 7.1.1.4 UNLIMITED COMPANIES 7.1.2 INCORPORATION OF A COMPANy 7.1.2.1 REGISTRATION OF A NEW COMPANY 7.1.2.2 PURCHASE OF A SHELF COMPANY 7.1.2.3 WHO CAN INCORPORATE A COMPANY? 7.1.3 ShAREhOLDERS 7.1.3.1 CONDITIONS AND CHARACTERISTICS 7.1.3.2 NUMBER OF SHAREHOLDERS 7.2 branches oF Foreign coMpanies 7.3 7.4 7.5 7.6 Joint ventures sole proprietorship partnership representative oFFice/regional oFFice
varIous IncentIves and busIness-frIendly regulatIons provIde the promIse of excItIng busIness opportunItIes In malaysIa
structure of business entities
chapter 7
Structure of Business Entities

types oF business entities allowed to do business in Malaysia
In Malaysia, a business may be conducted via: Locally-incorporated companies under the Companies Act 1965 Branches of foreign companies registered under the Companies Act 1965 Joint ventures Sole proprietorships Partnerships Additionally, the Malaysian Government encourages foreign investors with regional operations to set up in Malaysia by providing various tax and other related incentives to the OHQ, RDC and IPC.
7.1 coMpanies incorporated in Malaysia
7.1.1 Forms of Companies Malaysian companies can take several forms, namely, companies limited by shares, companies limited by guarantee, companies limited by both shares and guarantee and unlimited companies with share capital. These classifications indicate the extent of the members/shareholders liability. Further, companies can either be private companies or public companies. In either instance, companies generally take the form of companies limited by shares. A private limited company cannot have more than 50 members. Further, a private limited company can be classified as an exempt private company where its membership does not exceed 20 and its shares are not beneficially owned by any corporation. An exempt private company is exempted from certain regulatory requirements, such as the need to submit its balance sheet and profit and loss account with its annual return. A public company is one that does not fall within the definition of a private company. Therefore, public companies would have more than 50 members and a listed public company is one whose shares are listed on Bursa Malaysia. 7.1.1.1 Companies Limited by Shares This is the most common legal form of a company in Malaysia. A shareholders liability in such companies is limited to the quantum of any amount remaining unpaid on their shares. Where such companies are private limited companies, the name of the company will be followed by the words Sendirian Berhad (abbreviated to Sdn. Bhd.), e.g. ABC Sdn Bhd. Where the companies are public companies (i.e. the company has more than 50 members), the name of the company will be followed by the words Berhad (abbreviated to Bhd.). Where the shares in such companies are fully paid, the shareholders will have no personal liability. Where shares are only partly paid, the shareholders will only be liable for the unpaid portion. 7.1.1.2 Companies Limited by Guarantee Companies limited by guarantee do not have share capital. Hence, members are only liable to contribute a specified guaranteed amount where the companys assets are insufficient to meet its liabilities upon winding up. These companies are applicable to non-profit making organisations. pg. 5
7.1.1.3
Companies Limited by both Shares and Guarantee The members/shareholders liabilities in such companies are a combination of those as explained in 7.1.1.1 and 7.1.1.2. Unlimited Companies These companies do not have share capital (as with companies limited by guarantee) and there is no limit on the members liabilities in the event of winding up where the companys assets are inadequate to meet its liabilities.
7.1.1.4
7.1.2 Incorporation of a Company Companies are formed or created through the process of incorporation pursuant to the Companies Act 1965. A person seeking to set up a company can either incorporate or register a new company, or acquire a shelf company. 7.1.2.1 Registration of a New Company The following steps are required to register a new company: An application must be submitted to the Companies Commission of Malaysia (CCM), using Form 13A, and a payment of RM30 is required to ascertain whether the intended name for the company may be used If the name is available, the CCM will reserve this for a period of 3 months During the 3-month period, the company must lodge its Memorandum, together with its Articles of Association (if available), Declaration of Compliance (Form 6) and Statutory Declaration (Form 48A) Once the CCM has approved the application, a certificate of incorporation will be issued and the body corporate will be formed
7.1.2.2
Purchase of a Shelf Company A shelf company is a company which has already been incorporated for sale. A shelf company would be dormant and ready for use upon purchase, subject to approval of a name change. Shelf companies would generally be incorporated with the minimum authorised capital of RM100,000 and minimum paid-up capital of RM2. Typically, such companies would also have the required members/shareholders and directors. The price at which such companies are sold would generally include the capital registration fee, and the other costs associated with the incorporation of a company. Shelf companies can be acquired from many company secretarial or other professional firms. It should be noted that where a shelf company is acquired and the name change is approved, the company is entitled to use the new name. Nevertheless, the former name of the company must appear beneath its present name on all documents (e.g. business letters, statements of account, invoices, official notices, cheques, receipts, etc.) for a period of not less than 12 months from the date of the name change.
7.1.2.3
Who can Incorporate a Company? The Companies Act 1965 provides that any two or more persons may incorporate a company by subscribing their names to a Memorandum and complying with the registration requirements. There must be at least: two natural persons whose principal or only place of residence is in Malaysia, to be named as first directors in the Memorandum of the intended company; and
pg. 5
structure of business entities

one natural person whose principal or only place of residence is Malaysia, to be appointed as secretary of the intended company and who must be a qualified and licensed Secretary under the Companies Act 1965.
7.1.3 Shareholders The terms shareholder and member of a company can be used synonymously. A company can have as few as one shareholder where that shareholder is a corporation. Otherwise, a company must have at least two members/shareholders. 7.1.3.1 Conditions and Characteristics The holding of shares in a company represents the rights that the shareholder has in that company. Essentially, once a shareholder has contributed money to the company (in the form of equity capital generally), the money will belong to the company and not to the shareholder. The shares will constitute property, which can be transferred (subject to the terms of the Articles of Association of the company). The shares in turn carry certain rights for the shareholder, such as distribution rights and voting rights, etc. In general, all shares rank pari passu, meaning that all shares carry equal rights. However, a company can issue different classes of shares conferring different rights to the respective shareholders. The directors of a company will normally have the power to issue different classes of shares (unless this authority is excluded in the companys Articles of Association). It is recommended (although not a statutory requirement) that the companys Articles of Association and/or Memorandum should set out the different classes of shares which the company can issue, together with the rights attaching to such shares. In the case of preference shares, it is a requirement that the rights attaching to such shares be stipulated in the Articles of Association and/or Memorandum (Section 66 Companies Act 1965). Preference shares do not confer any voting rights upon the shareholder but grant the shareholder the right to receive a certain amount upon distribution (in the form of dividends) or upon redemption when the company is liquidated or wound up. Ordinary shares are the most common form of shares. As mentioned above, these carry certain rights for the shareholders, such as voting rights, distribution rights and the rights to receive information. Every shareholder of a company has a right to receive certain information about the company. Much of this information must be disclosed in the audited accounts to the CCM, thereby making this publicly available information to which all shareholders will have access. Additional rights to information may be available depending on the rights conferred in the Articles of Association, the class of shares, etc. 7.1.3.2 Number of Shareholders As highlighted above, a company can have at the minimum 1 corporate shareholder. If the shareholders are not corporate shareholders, a minimum of two shareholders is required.
7.2
branches oF Foreign coMpanies
A foreign company desiring to conduct business or establish a place of business in Malaysia must register with the CCM. Branches are generally permitted to engage in a wide range of businesses in Malaysia with some exceptions such as the carrying out of banking services or engaging in the wholesale and retail trade in Malaysia. With respect to the latter, approval may be sought in limited circumstances from the Ministry of Domestic Trade and Consumer Affairs.
pg. 5
7.3
Joint ventures
Businesses can operate in Malaysia through joint ventures, which may either be incorporated or unincorporated joint ventures. The term joint venture does not denote a separate and distinct business entity. In some instances, subject to terms and contributions, joint ventures can amount to partnerships for tax purposes.
7.4 sole proprietorship
All sole proprietorships must be registered with the Registrar of Businesses (under the auspices of the CCM) under the Registration of Businesses Act 1965.
7.5 partnership
These are business concerns consisting of not less than 2 and not more than 20 partners. In a partnership, partners are jointly and severally liable for the debts and obligations of the partnership. Formal partnership deeds may be drawn up setting the rights and obligations of each partner but this is not obligatory. The registration of partnerships must also be made with the Registrar of Businesses (under the auspices of the CCM) as required in the Registration of Businesses Act 1965.
7.6 representative oFFice/regional oFFice
A Representative Office/Regional Office of a foreign company can be established in Malaysia to perform permissible activities for its headquarters/principal. Such offices should be totally funded from sources outside Malaysia and are not required to be incorporated or be registered with the CCM under the Companies Act 1965. A Representative Office is established to collect investment-related information and business opportunities in Malaysia. On the other hand, a Regional Office serves as the coordination centre for its affiliates, subsidiaries and agents within the Asia Pacific region and is responsible for conducting designated activities within the region it operates. An approved Representative/Regional Office is allowed to carry out the following activities: Planning or coordination of business activities Gathering and analysing information or undertaking feasibility studies on investment and business opportunities in Malaysia and the region Identifying sources of raw materials, components or other industrial products Undertaking research and product development Acting as a coordination centre for the corporations affiliates, subsidiaries and agents in the region
However, an approved Representative/Regional Office is not allowed to carry out the following activities: Engage in any trading (including import and export), business or any form of commercial activity Lease warehousing facilities. Any shipment/transshipment or storage of goods must be carried out through a local agent or distributor Conclude business contracts on behalf of the foreign corporation or provide services for a fee Participate in the daily management of any of its subsidiaries, affiliates or branches in Malaysia Conduct any business transaction or derive income from its operations
Applications for the establishment of Representative/Regional Offices should be submitted to the Malaysian Industrial Development Authority (MIDA). The approval for the establishment of Representative/Regional Offices and employment of expatriates is valid for a period of 2 years and is renewable. pg. 0
Chapter Financing Reporting and Audit Requirements

8.1 accounting standards 8.2 audit reQuireMents 8.3 record keeping
all companIes comply wIth approved accountIng standards to achIeve greater transparency
financing reporting and audit requirements

chapter 8
Financing Reporting and Audit Requirements

accounting and audit regulations
The Companies Act 1965 includes stringent provisions relating to: the maintenance and retention of accounting records the maintenance of registers and minutes relating to directors and shareholders and their meetings the form and content of annual accounts the publication to shareholders and public filing of annual accounts the requirements for annual accounts to be audited the penal provisions for incorrect or unsatisfactory annual accounts There are no regulations directly governing the accounting practices of unincorporated businesses such as sole proprietorships and partnerships. However, such unincorporated businesses would have to comply with the Income Tax Ruling 4/2000 as mentioned below.
8.1 accounting standards
Approved accounting standards are issued by the Malaysian Accounting Standards Board (MASB). The Companies Act 1965 requires that accounts be prepared in accordance with approved accounting standards. For entities other than private entities, the approved accounting standards issued by the MASB are referred to as Financial Reporting Standards (FRS) which accord with internationally-approved accounting standards. Private entities are subject to Private Entity Reporting Standards (PERS) which are generally less stringent. Private entities may choose to apply FRS as well. A private entity is a private company incorporated under the Companies Act 1965 that: a) is not itself required to prepare or lodge any financial statements under any law administered by the Securities Commission (SC) or Bank Negara Malaysia (BNM); and b) is not a subsidiary or associate of, or jointly controlled by, any entity outlined in (a) above.
8.2 audit reQuireMents
Every company is required to prepare a set of accounts (showing the companys profit and loss statement and balance sheet), which must be duly audited by independent auditors. The audited accounts must be presented at the companys Annual General Meeting (AGM) within 18 months of the date of incorporation and thereafter at least once every calendar year. The intervals between the presentation of the accounts must not be more than 15 months apart and the accounts must be made up to a date not more than 6 months before the date of the AGM. In this connection, the AGM must be held within 6 months of the companys financial year-end.
pg. 63
The audited accounts must be filed with the Companies Commission of Malaysia (CCM) together with an annual return and directors report within 1 month of the companys AGM. It should be noted that exempt private companies are not required to submit their profit and loss account and balance sheet together with their annual returns, although the relevant accounting standards continue to apply to such entities. Exempt private companies are those which do not have any corporate members/shareholders and have no more than 20 members/shareholders. The Companies Act 1965 imposes a statutory requirement on all companies to appoint independent external auditors who should be qualified and approved. For a new company, the directors or shareholders (depending on the Articles of Association) are responsible for appointing an auditor before the first AGM. The appointment of an independent auditor will last until the next AGM whereupon the auditor may be reappointed or asked to resign and new auditors will be appointed.
8.3 record keeping
The Companies Act 1965 requires each company to retain accounting and other records in connection with their transactions and financial position for a period of 7 years after the completion of the transactions or operations to which they respectively relate. The records must be kept either at the registered office of the company or at such other place in Malaysia. The company may keep its accounting and other records pertaining to its operations outside Malaysia at a place outside Malaysia. However, such records must be produced in Malaysia if requested by the CCM. Aside from the requirements of the Companies Act 1965, the Income Tax Act 1967 also imposes an obligation on taxpayers to keep appropriate books and records. Under the Public Ruling 4/2000 issued by the Inland Revenue Board (IRB), all companies must keep records and books of accounts including a cash book, sales ledger, purchase ledger and a general ledger. For tax purposes, the appropriate records must be maintained for 7 years from the end of the year to which any income from the business or operations relates. The books should also be written up at regular intervals. Appropriate entries for each transaction should be recorded as soon as possible (in any case not later than 60 days after the transaction). Supporting documents such as invoices, bank statements, pay-in slips, cheque butts, receipts for payments, payroll records and copies of receipts issued should also be retained. Receipts issued should be serially numbered. All companies must ensure that the appropriate records are available in the event of a tax audit/investigation.
pg. 4
Chapter 9 Intellectual Property

9.1 patents 9.2 copyright 9.3 tradeMarks 9.4 industrial designs 9.5 layout designs oF integrated circuits
busInesses enJoy Intellectual property protectIon In malaysIa
intellectual property
chapter 9
Intellectual Property
intellectual property protection
The Malaysian intellectual property laws afford protection via an extensive statutory scheme covering intellectual property rights. This includes copyright, trademarks, designs, patents and layout designs of integrated circuits in compliance with Malaysias obligation as a signatory to the Agreement on Trade Related Aspects of Intellectual Property (TRIPS). Malaysia has acceded to the World Intellectual Property Organisation, the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, as well as the Patent Cooperation Treaty (PCT). The Intellectual Property Corporation of Malaysia (MIPC) is a statutory body established to, among others, generally assist in the administration and enforcement of intellectual property laws and issues or matters relating to intellectual property in conformance with international standards and provide adequate protection to both local and foreign investors.
9.1 patents
Patent law in Malaysia is governed by the Patents Act 1983 and the Patent Regulations 1986. The owner of a patent has the exclusive rights, in relation to the patent, to exploit the patented invention, assign or transmit the patent, or to conclude licensee contracts. Anyone seeking to deal with the patent where the rights are exclusive to the owner will need to get prior consent from the latter. The accession by Malaysia to the Patent Cooperation Treaty (PCT) means that Malaysia is a designated country in respect of a patent application filed in another contracting state on or after 16 August 2006. Malaysia will also be automatically designated for a request for international preliminary examination as regards an application filed in another contracting state. Malaysian applicants themselves will be able to elect for PCT applications where the same treatment will be accorded to them as with applicants from contracting states.
9.2 copyright
Malaysia has an extensive statutory scheme for the protection of work under copyright. The Copyright Act 1987 and its regulations govern the law on copyright in Malaysia. Malaysia acceded to the Berne Convention on 1 October 1990. The types of works protected by copyright in Malaysia are literary, musical and artistic works, films, sound recordings and broadcasts. Derivative works are also protected. The owner of the copyright in a literary, musical or artistic work, film, sound recording or derivative work has the exclusive right to control certain acts in these works, including reproduction and communication, performance or distribution to the public, either in its original or derivative form. Copyright protection in literary, musical or artistic works is for the duration of the life of the author plus 50 years after death. There is no requirement for registration. Civil remedies are available to a copyright owner whose copyright is infringed. Malaysia also imposes criminal penalties for violations of its copyright laws. A special team of officers from the Ministry of Domestic Trade and Consumer Affairs is appointed to enforce the Act. They are empowered to enter premises suspected of having infringing copies, search and seize infringing copies and contrivances; and arrest without warrant. pg. 6
9.3
tradeMarks
Trademarks are accorded protection both under common law and by registration pursuant to the Trade Marks Act 1976 and Trade Marks Regulations 1997. Trademarks which are either pending registration, or for which no application for registration have been made, are protected under the common law, provided the owner of such unregistered marks can show proof of goodwill and reputation in the use of the said marks in relation to goods or services. The registration of a trademark will be for a period of 10 years but may be renewed from time to time in perpetuity. Upon registration of a trademark, the proprietor has the exclusive right to use the trademark in relation to those goods or services subject to any conditions, amendments, modifications or limitations entered in the Register of Trade Marks. The Register of Trade Marks is kept at the Central Trade Marks Office. In accordance with TRIPS, Malaysia prohibits the registration of well-known trademarks by unauthorised persons and provides for border measures to prohibit counterfeit trademarks from being imported into Malaysia.
9.4 industrial designs
The Industrial Designs Act 1996 and Industrial Designs Regulations 1999 apply to applications for the registration of industrial designs made after 1 September 1999. The owner of a registered industrial design will have the exclusive right to make or import for sale or hire, or for use for the purposes of any trade or business, or to sell, hire or to offer or expose for sale or hire, any article to which the registered industrial design has been applied. Once registered, the rights associated with an industrial design will be that of a personal property in that it will be capable of assignment and transmission by operation of law. Registered designs are protected for an initial period of 5 years which may be extended to a further two 5-year terms, resulting in a total period of 15 years.
9.5 layout designs oF integrated circuits
The Layout Designs of Integrated Circuits Act 2000 (LDIC) provides for the protection of layout designs of integrated circuits based on originality, the creators own invention and the fact that the creation is freely created. There is no registration for the layout design of an integrated circuit. The LDIC automatically grants the owner of an original circuit layout certain rights to copy the layout, make an integrated circuit in accordance with the layout and exploit the layout commercially. The rights can be transferred either partly or wholly by way of assignment, license, wills or through the enforcement of law. The duration of protection is 10 years from the date of commercial exploitation or 15 years from the date of creation if not commercially exploited. The Act is implemented in compliance with the TRIPS agreement to provide a guarantee to investors in Malaysias electronics industry and ensure the growth of technology in the country.
pg.
Chapter 10 Taxation
10.1 tax adMinistration 10.1.1 SELF-ASSESSMENT SySTEM 10.1.2 PAyMENT OF TAx 10.1.2.1 COMPANIES 10.1.2.2 INDIVIDUALS 10.1.2.2.1 EMPLOYMENT 10.1.2.2.2 SELF-EMPLOYMENT/ SOLE PROPRIETORS 10.1.3 PuBLIC RuLINGS 10.2.2 INDIVIDuALS 10.2.2.1 SCOPE OF TAxATION 10.2.2.2 RESIDENCE 10.2.2.3 TAx RATES 10.2.2.4 PERSONAL RELIEFS 10.2.3 WIThhOLDING TAx 10.3 capital taxes and transFer taxes 10.4 indirect taxes 10.4.1 ALuE ADDED TAx V (VAT)/GOODS AND SERVICES TAx (GST) 10.4.2 SALES TAx 10.4.3 SERVICE TAx 10.4.4 CuSTOMS DuTy 10.4.5 ExCISE DuTy
10.2 direct taxes 10.2.1 COMPANIES 10.2.1.1 SCOPE OF TAxATION 10.2.1.2 CORPORATE TAx RESIDENCE 10.2.1.3 RATE OF TAx 10.2.1.4 TAx COMPUTATION 10.2.1.4.1 SOURCE BASIS 10.2.1.4.2 DEDUCTIBLE ExPENDITURE 10.2.1.4.3 CAPITAL ALLOWANCES 10.2.1.4.4 TAx LOSSES 10.2.1.4.5 TAx INCENTIVES 10.2.1.4.6 TRANSFER PRICING
0
malaysIa offers a comprehensIve range of tax IncentIves
taxation
chapter 10
Taxation
overview oF the tax scheMe in Malaysia tax adMinistration
10.1
10.1.1 Self-assessment System Malaysia operates a self-assessment basis of taxation. This means that returns filed by taxpayers are deemed to be their assessments. The onus is therefore on the taxpayer to ensure that the return is correctly filed. To enforce this, the Inland Revenue Board (IRB) will carry out tax audits on taxpayers to ensure compliance with the tax laws. The IRB also has the powers to carry out tax investigations, which would occur where an element of fraud is suspected. 10.1.2 Payment of Tax Taxpayers are required to pay their taxes in advance of their assessments. The following sets out the manner in which tax payments are made for different categories of taxpayers: 10.1.2.1 Companies A company is required to notify the IRB of its estimated tax liability not later than 30 days before the start of its financial year. For example, a company with a financial year from 1 January to 31 December must notify the IRB of its estimated chargeable income for the financial year ended 31 December 2008 by 1 December 2007. It should be noted that the tax estimate must be at least 85% of the prior years estimate or revised estimate. Companies are entitled to revise their tax estimates in the 6th and/or 9 th month of their financial years. Where a companys actual tax liability (as per the assessment) is greater than the estimate or revised estimate by more than 30%, the difference in excess of the 30% will be subject to a penalty of 10%. Therefore, it is important to ensure that tax estimates are accurately computed. Once an estimate has been furnished, the estimated tax will be payable in 12 equal monthly instalments, commencing from the 2nd month of the financial year. The tax is due by the 10 th date of each month. Late payments will be subject to a penalty of 10%. Where a company is new and is about to commence business, the estimate of tax payable for its first year of operations must be submitted within 3 months from the date of commencement of operations. The instalments will become payable commencing from the 6th month of the financial year. 10.1.2.2 Individuals Individuals who arrive in Malaysia and who will be chargeable to tax are required to notify the IRB of their chargeability to tax within 2 months of their arrival. Where an employer commences to employ an individual who is or is likely to be chargeable to tax in respect of income from the employment, the employer is required to notify the IRB within 1 month thereafter, stating the full name and address of the individual and the terms and date of commencement of the employment.
pg.
10.1.2.2.1
Employment For employees, taxes are collected from their payroll through a Schedular Tax Deduction Scheme (STD) which employers are obliged to administer. Employers are required to deduct the relevant STD payments from the employees salaries each month and pay this amount to the IRB. Self-employment/Sole Proprietors An individual who is self-employed is also required to pay tax by instalments based on an instalment scheme which will be issued by the IRB.
10.1.2.2.2
10.1.3 Public Rulings To assist taxpayers in understanding their compliance obligations and to provide an indication of the IRBs interpretation of the tax laws, the IRB has issued Public Rulings on several areas. Public Rulings do not carry statutory force but are useful in a self-assessment environment to provide guidance to taxpayers. Taxpayers are advised to read the Public Rulings which can be found at the IRBs website: www. hasilnet.org.my.
10.2 direct taxes
10.2.1 Companies 10.2.1.1 Scope of Taxation Both resident and non-resident companies are taxed on a territorial basis, i.e. on income accruing in or derived from Malaysia. Foreignsourced income received in Malaysia is tax exempt. However, resident companies engaged in the business of banking, insurance, shipping and air transport are taxable on their worldwide income. Corporate Tax Residence A company is tax resident in Malaysia where the control and management of the business or businesses of the company are exercised in Malaysia. Such control and management is determined through the place where the Board of Directors meetings are held. Not all board meetings need to be held in Malaysia. At least one such meeting where important corporate decisions are made would be sufficient to render the company a resident. Rate of Tax The rate of corporate income tax in Malaysia is 27% for the year of assessment 2007 (i.e. for financial year ended in 2007) and will be reduced to 26% for the year of assessment 2008. It has been proposed in the 2008 Budget that the corporate tax rate will be further reduced to 25% for the year of assessment 2009. However, resident companies with a paid-up share capital (comprising ordinary shares) of RM2.5 million or less are subject to tax at a rate of 20% on the first RM500,000 of chargeable income. The remainder chargeable income is subject to the prevailing corporate tax rate. Companies enjoying tax incentives will be exempt on a percentage or all of their income depending on the incentive granted to the company (refer to 10.6 below for tax incentives available to companies in Iskandar).
10.2.1.2
10.2.1.3
pg. 72
taxation
10.2.1.4
Tax Computation 10.2.1.4.1 Source basis A company can have more than one business source of income as well as investment sources of income (e.g. interest, dividends, rental, etc.). Income from each type of business source or activity is taxed separately as is each source of investment income. Investment income is treated as passive income and only expenses directly incurred in earning such income will be deductible for tax purposes. 10.2.1.4.2 Deductible Expenditure Expenses are deductible for tax purposes where these are revenue in nature and are wholly and exclusively incurred in the production of gross income. This would typically include salaries, costs of running an office and overheads, maintenance costs, etc. The question of whether an expense is revenue or capital in nature (in which case it would not be tax deductible) is based on various factors including whether or not the expense secures an enduring benefit, whether it is one-off or recurrent, etc. The following sets out the tax treatment of expenses commonly charged by businesses: Accounting depreciation is not deductible for tax purposes but capital allowances (or tax depreciation) can be claimed instead on qualifying capital expenditure (refer to 10.2.1.4.3 below) Bad debts and provisions for bad debts may be deductible if these are reasonably expected in all the circumstances to be unrecoverable. An analysis of the debt would need to be undertaken and documented Entertainment expenses only enjoy a 50% deduction although in certain instances, a 100% deduction is available (e.g. staff entertainment) The costs of leave passages provided to employees are generally not deductible, except where the leave passage is a yearly leave passage within Malaysia involving the employer, employee and immediate family members of the employee Finance expenses (e.g. interest) are deductible against business income where the funds (on which the interest costs are incurred) are utilised for business purposes or on assets used or held for business purposes. Where interest costs are incurred on funds used for investment purposes, the interest costs will only be deductible against investment income and not against the business income. The deductibility of other finance costs such as guarantee fees, etc. will depend on the facts of each case. Where the costs are viewed as costs incurred in securing finance rather than in maintaining finance facilities, these costs are capital in nature and are not deductible. There are no thin capitalisation rules in Malaysia at present.
pg. 3
Based on deductibility rules, taxable profits and accounting profits will not be the same. The accounting profits need to be adjusted for tax purposes to arrive at taxable profits. Accounting profits, after adjusting for disallowable expenditure and non-taxable income are referred to as adjusted income for tax purposes. This is computed on a source by source basis, i.e. each business source is computed separately. Where this results in an adjusted loss, the loss can be relieved against other sources of income (refer to 10.2.1.4.4 below). 10.2.1.4.3 Capital Allowances Capital expenses are not deductible. However, capital allowances are available on capital expenditure incurred on plant and machinery (i.e. qualifying assets) used for the purposes of the business. An initial allowance of 20% (in the first year) and an annual allowance ranging from 10% to 20% (in the first year and thereafter) can be claimed until the relevant assets have a nil tax residual value (or tax written down value). Capital allowances are computed on a straight line basis based on the cost of the asset. The allowances are deducted against the adjusted income from a business source. Capital allowances in respect of a qualifying asset used in a specific business source can only be deducted against the income generated from that business source. Capital allowances are claimed against adjusted business income from a source to arrive at statutory income from that source. Where assets are sold within a 2-year period, the allowances claimed to date may be withdrawn (unless there was a proper commercial rationale for the disposal). Balancing allowances and charges are also computed on the sale of assets upon which capital allowances have been claimed. A balancing allowance arises where the sales proceeds are less than the tax written down value of the asset. Balancing allowances are deductible. Where the sales proceeds are greater than the tax written down value of the asset, a balancing charge will arise and this is taxable. Unabsorbed or unutilised capital allowances can only be carried forward and set off against income of the same business source. This is provided the shareholders of the company on the first day of the year of assessment (in which the allowances are being utilised) are substantially the same as the shareholders on the last day of the period in which the unabsorbed capital allowances arose. pg. 74
taxation
Therefore, if there is a substantial change in the companys shareholding, the unabsorbed capital allowances will be lost. The shareholders of a company will be viewed as substantially the same if on both the relevant dates, more than 50% of the paid-up capital (ordinary share) is held by, or on behalf of the same persons. 10.2.1.4.4 Tax Losses Where an adjusted loss arises, this can be utilised in the following ways: Current years adjusted business losses may be set off against any income source for that year 50% of the remaining adjusted loss may then be surrendered to a group company for group relief, which is discussed in more detail below. The remaining unabsorbed losses can be carried forward subject to the criteria outlined below Unabsorbed losses carried forward can only be utilised to set off business sources of income (which need not be the same business source) As with unabsorbed capital allowances, unabsorbed business losses can be carried forward and deducted in future years. This is provided the shareholders on the first day of the year of assessment (in which the losses are utilised) are substantially the same as the shareholders on the last day of the period in which the losses arose Currently, there are no provisions for loss carry back in Malaysia As mentioned above, group relief is available in certain circumstances. 50% of the current year adjusted loss of a company will be available for set-off against the total income of another company within the same group subject to the following conditions: - Both the claimant and surrendering company must have a paid-up capital (in respect of ordinary shares) of more than RM2.5 million; Both the claimant and surrendering company must have the same accounting period; The shareholding in both the claimant and surrendering company whether direct or indirect must not be less than 70%; and The 70% shareholding must be on a continuous basis during the relevant year and immediate preceding year.
pg. 5
However, group relief will not be available for companies which enjoy certain incentives (e.g. pioneer status, investment tax allowance, reinvestment allowance, etc.). Therefore, group relief is not available for companies enjoying tax incentives in Iskandar. 10.2.1.4.5 Tax Incentives Malaysia offers a comprehensive range of tax incentives to attract foreign investments and promote exports and investment in targeted sectors. Basically, tax incentives available to approved activities, sectors or industries are pioneer status (i.e. tax holiday) or investment tax allowance. In addition, tax incentives currently available include reinvestment allowance, investment allowance, double deductions for certain expenditure (e.g. R&D and promotion of exports), tax exemption for Islamic businesses and special tax treatment for venture capital companies. 10.2.1.4.6 Transfer Pricing There is a set of transfer pricing guidelines issued by the IRB which is aimed at providing taxpayers with guidance on domestic legislation, acceptable methodologies in determining arms length prices as well as types of documentation and records to be maintained for related party transactions. The guidelines are mainly based on the arms length principle as set out under the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines. Transfer pricing is enforced through the antiavoidance provisions in the Income Tax Act 1967 (ITA). 10.2.2 Individuals 10.2.2.1 Scope of Taxation All individuals are taxed on income accruing in or derived from Malaysia. Foreign-sourced income received by an individual is exempt from tax. Employment income and certain benefits in kind arising from employment are taxable. The value at which the benefits in kind are taxable are set out in several Public Rulings issued by the IRB. Self-employed individuals/ sole proprietors carrying on business activities are subject to the same rules with regard to computation of income for companies as set out above. For non-residents, their employment income is exempt from tax in Malaysia if the period of employment exercised in Malaysia is for a period/periods which in aggregate, do not exceed 60 days in a calendar year. Tax exemption is also available under the relevant tax treaty if pre-requisite conditions are met. pg. 7
taxation
10.2.2.2 Residence The test for residence status for individuals is set out in Section 7 of the ITA. There are essentially four tests under which an individual would be regarded as tax resident. In each of these tests, the number of days of physical presence in Malaysia is relevant. For this purpose, presence in Malaysia for part of a day is considered as presence for a full day. The four tests are as follows: a) The individual is in Malaysia for at least 182 days in the calendar year b) The individual is in Malaysia for less than 182 days in the calendar year (the period of less than 182 days being referred to as the shorter period) and that period is linked by; or to another period of 182 or more consecutive days (referred to as the longer period) throughout which he is in Malaysia in the adjoining year. However, any temporary absence from Malaysia of the following nature is regarded as forming part of the shorter and longer periods: i) Absence connected with his service in Malaysia and owing to service matters or attending conferences or seminars or study abroad; ii) iii) Absence owing to ill-health involving himself or any immediate member of the family; and Absence in respect of social visits not exceeding a total of 14 days;
provided that he is in Malaysia immediately before and after the temporary absence c) The individual is in Malaysia for 90 days or more during the year and was either in Malaysia for at least 90 days; or was a resident in any 3 of the 4 immediately preceding calendar years The individual is a resident for the calendar year following the year in question and was a resident for each of the 3 immediately preceding years
d)
10.2.2.3 Tax Rates Resident individuals are taxed at scale rates ranging from 0% (for the first chargeable income of RM2,500) to 28% (for chargeable income exceeding RM250,000). Non-residents are taxed at a flat rate of 28%.
pg.
10.2.2.4
Personal Reliefs Resident individuals may claim various personal reliefs which will effectively reduce their chargeable income. These include the following:
types oF relieFs Self Disabled individual (additional) Spouse (for joint assessments) Children (depending on age and education) Life insurance/contributions to the EPF Medical/education insurance Medical expenses for parents Costs of books, magazines, etc. Purchase of personal computer (once every 3 years) rM 8,000 6,000 3,000 1,000 4,000 6,000 3,000 5,000 1,000 3,000
10.2.3 Withholding Tax Payments made to non-residents in respect of interest, royalties, fees for services performed in Malaysia (for both technical and non-technical services, other than routine day-to-day administrative services between a parent and subsidiary or head office and branch) and rental payments for movable property will attract withholding tax. In addition, contract payments to non-residents for contract projects undertaken in Malaysia are also subject to withholding tax. However, the tax withheld is an advance tax payable on account of the corporate tax liability of the non-resident. The rates of withholding tax are as follows: Interest - 15% on the gross payment Royalties - 10% on the gross payment Service fees - 10% on the gross payment Rental for movable property - 10% on the gross payment Contract projects - 13% on the gross payment (i.e. 10% on account of the non-residents taxes and 3% on account of the employees taxes) The payer is obliged to withhold the tax and remit the tax to the IRB within 1 month from the date of payment or crediting of the payment to the nonresident. Non-compliance with this provision will result in a penalty of 10% of the withholding tax imposed. Where the tax and penalty remain unpaid, the payer will be denied a tax deduction for the expense. Double tax agreements may provide reduced rates of withholding tax. IDRstatus companies, approved developers and approved development managers are exempted from compliance with the withholding tax provisions in respect of certain payments made to non-residents (refer to Chapter 12).
pg. 7
taxation
10.3
capital taxes and transFer taxes
There is no capital gains tax in Malaysia. Real Property Gains Tax (RPGT) which used to apply on chargeable gains arising from the disposal of real property or shares in real property companies is now exempt. Exemption from RPGT took effect from 1 April 2007 in respect of gains arising from the disposals of real property after 31 March 2007. Stamp duty is imposed on instruments of transfer giving rise to the transfer of property. The rates of stamp duty vary depending on the property concerned. For the transfer of property (excluding shares), stamp duty is computed on an ad valorem basis, ranging from 1% to 3%. Where shares are transferred, stamp duty is charged at the rate of 0.3% of the market value of the shares transferred or the transfer consideration, whichever is greater on the date of transfer.
10.4 indirect taxes
Indirect taxes are imposed in the Principal Customs Area (PCA) which covers all of Malaysia with the exception of the islands of Labuan, Langkawi, Tioman and various designated areas and zones (pursuant to the Free Zones Act 1990) within the PCA. Iskandar as a whole, is not designated as a free zone. However, there are several areas within Iskandar which have been accorded free zone status. There are several indirect taxes in Malaysia which are explained briefly below. 10.4.1 Value Added Tax (VAT)/Goods and Services Tax (GST) Presently, Malaysia does not operate a VAT/GST system. A GST system has been proposed but the implementation date for this has yet to be announced. 10.4.2 Sales Tax Sales tax is a single stage tax which is generally levied on: imported goods at the time of importation; and locally-manufactured goods at the time the goods are sold or otherwise disposed of by the manufacturer.
The standard sales tax rate is 10% whilst certain non-essential goods are subject to 5% sales tax. However, certain goods are not subject to sales tax including: locally-manufactured taxable goods which are directly exported goods which are temporarily imported into Malaysia and subsequently reexported or goods which are temporarily exported (e.g. for repairs) and subsequently re-imported into Malaysia goods which are sold to free zones and bonded warehouses importation of raw materials, components and packaging materials used in the manufacture of taxable goods
pg.
Any person who is engaged in the manufacture of taxable goods with an annual sales value in excess of RM100,000, is required to apply for a sales tax licence under the Sales Tax Act 1972 (STA). Where the taxable goods are sold in the domestic market, the licensed manufacturer is required to impose, collect and pay the sales tax to the Customs Department. The submission of the sales tax return must be done once every two months together with the payment of sales tax, if any. A sales tax licence is not required for several activities including the following: Developing and printing of photographs and the production of film slides Manufacture of ready-made concrete Preparation of tarred metal, tarred screenings and hot-mixed preparations of bitumen and metal for road-making Repacking of bulk goods into smaller packages by a person other than a licensed manufacturer Repair of second-hand or used goods Installation of air conditioners in motor vehicles
However, manufacturers undertaking such activities are required to apply for a certificate of exemption from licensing. 10.4.3 Service Tax Service tax is imposed on taxable services (which includes the sale of food, drinks and tobacco products) provided by a taxable person pursuant to the Service Tax Act 1975. The rate of service tax is 5%. Where no charge is imposed on the provision of taxable services (and goods), an arms length value is imputed upon which service tax is payable. Service tax is not imposed in respect of exported services (where the services are in connection with goods or land situated outside Malaysia). Service tax is imposed in respect of taxable services provided by taxable persons subject to an annual sales turnover of RM150,000 or RM300,000 depending on the type of service involved. The following are examples of taxable services: a) accounting, auditing, bookkeeping, consultancy or other professional services b) c) d) e) f) g) h) i) legal services including consultancy services on legal matters engineering consultancy or other professional services architectural services including professional consultancy services surveying services including valuation, appraisal, estate agency or professional consultancy services consultancy services (excluding medical and surgical treatment provided by private clinics or specialist clinics) management services including project management or project coordination provision of lodging or sleeping accommodation, sale of food/drinks /tobacco products, health and massage services and other hotel-related services parking spaces for motor vehicles where parking charges are imposed
pg. 0
taxation
j) k) l)
advertising services telecommunication services provision of services for clearing of goods from customs control
m) provision of courier delivery services for documents or parcels not exceeding 30 kilograms n) general servicing, engine repairs and tuning, changing, adjusting and fixing of parts, wheel balancing, wheel alignment or body repairs including knocking, welding or repainting of motor vehicles provision of veterinary services
o)
Certain intra-group services are exempt from service tax. Every taxable person who carries on a business of providing taxable service (where the annual sales turnover for the provision of taxable service exceeds the prescribed threshold) is required to apply for a service tax licence under the Service Tax Act 1975. Service tax is charged when the invoice for the provision of taxable services is issued. Service tax returns are required to be submitted once every two months to the Customs Department together with the payment of service tax received from the customers. In the event the licensee does not receive payment from its customers, service tax is nonetheless payable to the Customs Department after a 12-month period from the date of issuance of the invoice. In the 2008 Budget, it has been proposed that the licensing threshold of RM150,000 for professional, consultancy and management services will be abolished with effect from 1 January 2008. 10.4.4 Customs Duty Customs duties are levied on goods imported into or exported from Malaysia. The amount of duty is dependent on the classification of goods as set out in the Harmonised Commodity Description and Coding System. Being a member of the World Trade Organisation (WTO), Malaysia uses the WTO Customs Valuation Code as the basis of valuation for customs purposes. Basically, the transaction value is used as the basis of valuation for import duty purposes (as well as for sales tax refer to 10.4.2 above) for imported goods. Preferential rates of import duties may be available in relation to goods manufactured within the Association of Southeast Asian Nations (ASEAN) member countries and in countries with which Malaysia has entered into bilateral Free Trade Agreements. The Customs Act 1967 allows for certain exemptions/reliefs for certain sectors involving manufacturing, warehousing and trading, amongst others, including the following: subject to various conditions, exemptions from import duties are generally available for raw materials and components used in the manufacture of goods for export exemptions from import duties may be available for machinery and equipment that are not available in Malaysia but are imported for use directly in manufacturing processes import duties are not payable within bonded warehouses for the storage of dutiable goods and in free zones, etc. pg. 8
10.4.5 Excise Duty Excise duty is levied on a limited range of goods (locally-manufactured or imported). These include: passenger motor vehicles motor cycles alcoholic beverages cigarettes Excise duty may be computed on an ad valorem basis or using specific rates depending on the goods in question. Before such goods can be removed from the relevant manufacturing premises or upon clearance from customs control, the excise duty must be paid. As with other indirect taxes mentioned above, there are certain exemptions/ reliefs from excise duty. Businesses located outside the PCA (e.g. in free zones) are not subject to the above indirect taxes.
pg. 2
Chapter 11 Immigration and Employment Matters

11.1 iMMigration reQuireMents 11.1.1 VISAS 11.1.2 EMPLOyMENT PASSES 11.1.3 POLICy REGARDING EMPLOyMENT OF ExPATRIATE PERSONNEL 11.1.4 APPLICATION FOR ExPATRIATE POSTS 11.1.5 EMPLOyMENT OF FOREIGN WORKERS 11.1.6 SPECIAL CATEGORIES OF EMPLOyMENT PASSES 11.2 legal reQuireMents under the eMployMent act 1955 11.3 eMployees provident Fund (epF) 11.4 social security organisation (socso)

malaysIas thrIvIng economy offers a stable workIng envIronment wIth ample opportunItIes In most areas of expertIse
immigration and employment matters

chapter 11
Immigration and Employment Matters

working in Malaysia
There are various regulations in Malaysia which govern the employment of foreign nationals as well as Malaysians. These include immigration requirements, the requirements of the Employment Act 1955, contributions to the Employees Provident Fund (EPF) and contributions to the Social Security Organisation (SOCSO) as set out below.
11.1 iMMigration reQuireMents
11.1.1 Visas Every person entering Malaysia is required to have a valid national Passport or internationally-recognised Travel Document which must be recognised by the Immigration Department for entry into Malaysia. Additionally, depending on the individuals nationality, a visa may be required prior to arrival/entry into Malaysia. Visas can generally be obtained at the Malaysian Embassy/Consulate in the respective country of nationality of the individual. The following table sets out the visa requirements for nationals of the countries listed below:
visa reQuireMents No visa required citizens/nationals oF: Commonwealth countries (except India, Bangladesh, Pakistan, Sri Lanka, Cameroon, Mozambique and Nigeria), ASEAN countries, Switzerland, Netherlands, San Marino and Liechtenstein Algeria, Argentina, Austria, Bahrain, Belgium, Bosnia-Herzegovina, Brazil, Croatia, Cuba, Czech Republic, Denmark, Egypt, Finland, France, Germany, Hungary, Iceland, Italy, Japan, Jordan, Kyrgyz Republic, Kuwait, Lebanon, Luxembourg, Norway, Oman, Poland, Qatar, Romania, Saudi Arabia, South Korea, Sweden, Slovakia, Tunisia, Turkey, Turkmenistan, United Arab Emirates, United States of America, Uruguay and Yemen Iran, Iraq, Libya and Syria
No visa required for visit not exceeding three (3) months
No visa required for visit not exceeding two (2) weeks Visa required (prior to entry)
Afghanistan, India, Bangladesh, Pakistan, Sri Lanka, Bhutan, China, Myanmar, Nepal, Taiwan, Angola, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo Republic, Congo Democratic Republic, Cote d Ivoire, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Guinea Republic, Guinea-Bissau, Liberia, Madagascar, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal and Nigeria Israel, Serbia and Montenegro
Prior approval required from the Malaysian Government
Upon entry into Malaysia, the Passport/Travel Document will need to be endorsed with one of the following types of passes.
pg. 85
visit pass (social) Visit passes (social) are issued mainly to tourists and are solely for the purpose of a social visit. A person holding a social visit pass cannot take up employment, business or professional work while in Malaysia. visit pass (business) Business visit passes are generally issued to the following categories of entrants: - Owners of businesses (in Malaysia) and their representatives entering Malaysia to attend to company matters; - Investors or businessmen entering to explore business opportunities and investment potential; - Foreign representatives of companies entering to introduce goods for manufacture in Malaysia, but not to engage in direct selling or distribution; - Property owners entering to negotiate, sell or lease properties; - Foreign reporters from mass media agencies entering to cover any event in Malaysia; or - Participants in sporting events. Business passes cannot be used for employment or for supervising the installation of new machinery or the construction of a factory.
conversion of passes Foreign visitors who have entered Malaysia on social visit passes may apply to convert these into business visit passes. Such applications should be made to the Immigration Department. Applicants wishing to undertake manufacturing activities can convert their passes through the Immigration Department with a letter of recommendation from Malaysian Industrial Development Authority (MIDA).
11.1.2 Employment Passes There are several types of employment passes available to non-Malaysians. These are: visit pass (temporary employment) This is issued to persons who enter the country to take up temporary employment only. employment pass This is issued to persons who enter the country to take up an employment contract for a minimum period of 2 years. visit pass (professional) This is issued to persons on short-term contracts and such passes generally do not permit the individual to remain in Malaysia for more than 12 months. dependants pass This is issued to spouses and children of persons who have been issued with employment passes. Dependant passes should be applied for, together with the employment pass or after the latter has been approved. students pass This is issued to foreign students who enrol for a course of study in any approved educational institution.
pg.

11.1.3 Policy Regarding Employment of Expatriate Personnel The general policy with respect to the employment of expatriate personnel is that employment will be permitted where the requisite expertise/skills are not readily available amongst Malaysians. Employers are encouraged to hire and train Malaysians at all levels such that the relevant organisation reflects the multicultural nature of the Malaysian population. However, it is also recognised that there is a shortage of trained Malaysians in certain sectors, and it is therefore necessary to hire expatriate personnel to fill this gap. Foreign-owned companies investing in Malaysia are therefore able to hire expatriate personnel where necessary and should apply for the relevant number of expatriate posts required. In addition, such companies are also allowed key posts (posts that may be permanently filled by foreign nationals) indefinitely. IDRstatus companies, approved developers and approved development managers however, will not be subject to any restrictions with respect to the hiring of foreign knowledge workers. 11.1.4 Application for Expatriate Posts As mentioned above, where a company requires the services of an expatriate employee, an expatriate post must be applied for and approved by the Immigration Department or any agency authorised by the Immigration Department before an employment pass is obtained for the employee. It is envisaged that IRDA will be the agency to approve applications made by IDR-status companies, approved developers and approved development managers. There is no levy or charge imposed on the granting of expatriate posts/employment passes where the expatriates earn more than RM3,000 per month and the contracts are for a term of at least 24 months. However, a nominal fee will be imposed for key posts and management/professional and technical posts. 11.1.5 Employment of Foreign Workers Foreign workers differ from expatriate employees in this context in that the former are not necessarily skilled or trained. There are presently insufficient Malaysians in the work-force to meet the demand for such workers. Typically, foreign workers are allowed to work in the construction, plantation, services (as domestic maids, workers in the hotel industry, trainers and instructors) and manufacturing sectors. Foreign workers may only be hired from the following countries: - Cambodia - Myanmar - Turkmenistan - India - Nepal - Uzbekistan - Indonesia - Philippines - Vietnam - Kazakhstan - Sri Lanka - Laos - Thailand Those seeking approval to employ such workers would be required to show that efforts have first been made to source Malaysians for the jobs to be filled by the foreign workers. An annual levy is imposed on employers hiring foreign workers. The levy is RM100 per month for manufacturing, services and construction sectors. The levy is RM30 per month for domestic maids and plantation workers. For further information on Immigration regulations, please refer to the Immigration Departments website at http://www.imi.gov.my. pg. 8
11.1.6 Special Categories of Employment Passes The table below outlines the immigration passes for entry into Malaysia for employment with approved companies (i.e. IDR-status companies, approved developers and approved development managers) in Iskandar.
no 1 type oF pass Employment Pass for Expatriate Professionals holding Key Posts administratively referred to as Employment Pass (IDRExpatriate-Key Posts) duration As per employment contract If employment contract is silent, then duration is for so long as the person is employed by the approved company (subject to annual endorsement) eligible persons A person (other than a visitor, tourist, transit passenger or student) who is entering Malaysia in order to take up professional employment or a professional occupation under a contract: a) For a minimum period of 2-year employment in Iskandar with an: i) IDR-status company; ii) Approved developer; or iii) Approved development manager; and b) under which such person is entitled to a salary of not less than RM5,000 per month. Eligibility will be certified by the employer of the Employment Pass holder (Employer). 2 Employment Pass for Expatriate Professionals holding Executive Posts administratively referred to as Employment Pass (IDRExpatriateExecutive Posts) As per employment contract If employment contract is silent, then duration is for so long as the person is employed by the approved company (subject to annual endorsement) A person (other than a visitor, tourist, transit passenger or student) who is entering Malaysia in order to take up professional employment or a professional occupation under a contract: a) For a minimum period of 2-year employment in Iskandar with an: i) IDR-status company; ii) Approved developer; or iii) Approved development manager; and b) under which such person is entitled to a salary of not less than RM3,000 per month. Eligibility will be certified by the Employer. 3 Dependants Pass for wives & dependant children of holders of Employment Pass (IDRExpatriate-Key Post) and Employment Pass (IDRExpatriateExecutive Post) administratively referred to as Dependants Pass (IDR) As per duration of the husband /father holding the Employment Pass (IDRExpatriate -Key Post)/ Employment Pass (IDRExpatriateExecutive Post) Wife or dependant child (< 21 years) of the holder of a valid Employment Pass (IDR-Expatriate -Key Post)/Employment Pass (IDR-Expatriate-Executive Post) Eligibility will be certified by the Employer. Consent should be automatically given for the wife to take up any form of paid employment in Iskandar with the condition that the Dependant Pass is converted to Employment Pass of either one of these categories and she will no longer enjoy the status as a dependant of the Employment Pass (IDR-Expatriate-Key Post)/Employment Pass (IDRExpatriate-Executive Post) holder.
pg.

no 4 type oF pass Social Visit Pass for husbands, parents, mature children, common law wife & stepchildren of holders of Employment Pass (IDRExpatriate -Key Post) and Employment Pass (IDRExpatriateExecutive Post) administratively referred to as Social Visit Pass (IDR) Visit Pass (Temporary Employment) for domestic helpers & other household /personal servants of holders of Employment Pass (IDRExpatriate-Key Post) only administratively referred to as Visit Pass (Temporary Employment) (IDR) duration As per duration of the holder of the Employment Pass (IDRExpatriate -Key Post) and Employment Pass (IDRExpatriateExecutive Post) On yearly basis eligible persons Husband, parents, mature child ( 21 years), common law wife and stepchild of the holder of a valid Iskandar Employment Pass (IDR-Expatriate-Key Post) and Employment Pass (IDR-Expatriate -Executive Post). Eligibility will be certified by the Employer. If the husband or mature child later wishes to take up any form of paid employment in Iskandar, the Visit Pass will be replaced by an Employment Pass. The application will be subject to procedures applicable to Iskandar.
As per duration of the holder of the Employment Pass (IDRExpatriate-Key Post)
A person having a contract of service of a personal nature with the holder of a valid Employment Pass (IDR-Expatriate-Key Post). Eligibility will be certified by the Employer. For person who is to take up employment for a period of 1 year or less.
pg. 8
11.2
Legal Requirements under the Employment Act 1955 The primary legislation governing the terms and conditions of employment is the Employment Act 1955 (EA). The protection offered under the EA relates to employees whose monthly wages do not exceed RM1,500, manual workers and a few other specified categories. The EA stipulates the minimum terms and benefits for such employees including the requirement to provide rest days, public holidays, annual leave, sick leave, hospitalisation leave, maternity leave as well as termination benefits. In addition, the EA regulates the hours of work and specifies the rates to be paid for overtime work, work on rest days and public holidays.
11.3
Employees Provident Fund (EPF) The EPF is a statutory fund to which employers and Malaysian employees are required to contribute. This is obligatory and not optional. Expatriate employees can choose to contribute to the EPF and if they do, the employer is also obligated to make employers contributions in respect of that expatriate. The contributions are made to the account of the individual employee. At present, the employer is required to contribute a minimum of 12% of the employees monthly salary while the employee contributes a minimum of 11% of his/her salary. The 11% is deducted from the employees monthly salary. The employers contribution is tax deductible to the employer. If the employer contributes more than the obligatory 12%, a tax deduction will be available to the employer for contributions of up to 19% of the employees salary. Resident employees are allowed to claim a maximum of RM6,000 in respect of EPF contributions as relief against their taxable income. Upon reaching the age of retirement, employees may withdraw their money from the EPF free of tax. Prior to retirement, employees are able to withdraw a percentage of their EPF contributions for specifically approved purposes. Expatriates who opt to contribute to the EPF may withdraw their funds tax free upon leaving Malaysia. Further information on EPF can be obtained at http://www.kwsp.gov.my
11.4
Social Security Organisation (SOCSO) An employee employed under a contract of service or apprenticeship and earning monthly wages of RM3,000 and below must contribute to SOCSO, regardless of the employees age and employment status (whether permanent, temporary or casual in nature). SOCSO is an insurance scheme which provides compensation to eligible employees in the event of death or invalidity or disablement sustained in the course of exercising their employment. For employees who earn a monthly salary above RM3,000 and are currently not subject to SOCSO, contribution is at their own option. However, mutual agreement for contribution needs to be obtained between the employee and the employer in which case, the employer shall then be liable to contribute for the relevant employees. Further information on SOCSO can be obtained at http://www.perkeso.gov.my
pg. 90
Chapter 12 Incentive and Support Package

12.1 approved node 12.1.1 LOCATION MAP NODE 1 12.2 tax incentives available to coMpanies in iskandar 12.3 non-Fiscal incentives For iskandar 12.4 QualiFying activities 12.5 application process
2
a varIety of IncentIves, both fIscal and non-fIscal, are aImed at attractIng Investments and the best talents to malaysIa
incentive and support package
chapter 12
Incentive and Support Package

approved node
12.1
An approved node is a designated area within Iskandar as determined by IRDA. 12.1.1 Location Map Node 1 Node 1, an approved node, is shown in the map below.
danga bay
nusaJaya gelang patah
node 1
tanjung pelepas port
singapore
12.2
tax incentives available to coMpanies in iskandar
Tax / fiscal incentives will be made available to approved companies located in the approved node within Iskandar. Approved companies refers to approved developers, approved development managers and IDR-status companies. The incentives are as follows: i) Approved developers Exemption from income tax up to year of assessment 2015 on statutory income from the disposal of any right in or over land within the approved node designated by IRDA; Exemption from income tax up to year of assessment 2020 on statutory income from the rental or sale of buildings within the approved node designated by IRDA; and Exemption from compliance with the withholding tax provisions (up to 31 December 2015) on payments made to non-residents for services, interest and royalties.
ii)
Approved development managers Exemption from income tax on statutory income from the provision of management, supervisory or marketing services to an approved developer until the year of assessment 2020; and Exemption from compliance with the withholding tax provisions on payments made to non-residents for services up to 31 December 2015.
pg. 3
iii)
IDR-status companies Exemption from income tax on statutory income for 10 years provided operations commence on or before 31 December 2015. The exemption is in respect of income from qualifying activities within the approved node for clients situated within the approved node and outside Malaysia or wholly for clients outside Malaysia; and Exemption from compliance with the withholding tax provisions on payments for services and royalties to non-residents for a period of 10 years from the date of commencement of operations.
The qualifying activities fall within the following 6 categories of service-based sectors: Creative Education Financial advisory and consulting Healthcare Logistics Tourism Please refer to 12.4 below for the list of qualifying activities within the above sectors. iv) Companies which do not qualify for incentives as set out in (i), (ii) or (iii) above would still be able to enjoy existing tax incentives provided under current legislations subject to the fulfillment of the pre-requisite criteria. Such incentives generally take the form of pioneer status or investment tax allowance where such companies undertake promoted activities. Pioneer status generally provides a tax exemption on 70% of statutory income (i.e. gross income after deduction of tax deductible expenses and capital allowances) for a period of 5 years. The investment tax allowance generally provides an allowance of 60% of qualifying capital expenditure to be set off against 70% of statutory income. However, in certain instances, for both the pioneer status and investment tax allowance, exemption of up to 100% of statutory income may be available, depending on the industry involved or activity undertaken by the company. For example, projects of national and strategic importance will enjoy the 100% exemption.
12.3 non-Fiscal incentives For iskandar
Approved companies operating in the approved node will enjoy: Exemption from the FIC guidelines Flexibilities under the foreign exchange administration rules as follows: a) Make and receive payments in foreign currency with residents; b) Borrow any amount of foreign currency from licensed onshore banks and nonresidents; c) Invest any amount in foreign currency assets onshore and offshore; and d) Retain export proceeds offshore. Unrestricted employment of foreign knowledge workers Foreign knowledge workers in Iskandar will be able to import or purchase a duty free car for their personal use. This incentive is similar to that offered under the Malaysia My Second Home Programme.
pg. 94
incentive and support package

12.4 QualiFying activities
The list of qualifying activities may be expanded from time to time in line with the dynamic nature of the activities within the 6 service-based sectors in Iskandar and the needs of both the investors and the nation. The qualifying activities are as follows:
i creative industry and related services Creative and design services Creative talent management services Film and television Pre-production Production Post-production Distribution 4 Games and animation Content creation Production Post-production Distribution 5 Online and mobile content generation and advertising 6 Online and mobile content aggregation and enablers 7 Creative research and development 8 Distribution and marketing of creative content 9 Integrated media and content services 10 Visual and performing arts ii educational services 1 2 3 4 5 iii Universities Colleges Skills training institutions R&D institutions Regional training centres 1 2 3
Financial advisory and consulting services 1 2 3 Islamic financial services Business process outsourcing/offshoring Corporate consultancy and advisory services
iv
healthcare and related services 1 2 3 4 Hospitals and alternative medicine centres Integrated dental and orthodontic services Healthcare research and development Integrated laboratory services
logistics and related services 1 2 Integrated supply chain services High value supply chain services and solutions
vi
tourisM 1 2 3 4 Hotels Theme parks, amusement and family entertainment centres and cultural centres Conference centres and exhibition centres Regional operation of hotel and leisure services
pg. 5
12.5
application process
The flowchart below illustrates the application process to qualify as approved developers, approved development managers or IDR-status companies.
Investor makes enquiries on eligibility criteria and requirement for approved companies with IRDA OSC pre-application stage IRDA OSC registers the interest and forwards the relevant forms together with checklist to applicant
Investor submits formal application with supporting documents to IRDA OSC
IRDA OSC receives the application and informs investor of tentative approval date
processing stage
IRDA OSC processes the application
IRDA OSC forwards application together with recommendation for approval to Minister approval stage Minister approves application
IRDA OSC issues approval certificate together with handbook for approved companies post-approval stage IRDA OSC updates its master-list of approved companies and notifies the relevant ministries and agencies
pg. 9
Chapter 13 Frequently Asked Questions (FAQs)
3
frequently asked questions (faQs)

chapter 13
Frequently Asked Questions (FAQs)

what is the iskandar developMent region (iskandar)?
1.
Iskandar is the new southern development corridor in Johore that has been identified as one of the catalyst developments to spur the growth of the Malaysian economy. Iskandar covers 221,634 hectares (2,217 sq km) of land area within the southern-most part of Johore. The development region encompasses an area of about 3 times the size of Singapore and 2 times the size of Hong Kong. Iskandar covers the entire district of Johore Bahru (including the island within the district), Mukim Jeram Batu, Mukim Sungai Karang, Mukim Serkat and Kukup Island in Mukim Ayer Masin, all within the district of Pontian.
2. who is the iskandar regional developMent authority (irda)?
IRDA is a Federal statutory body established under the Iskandar Regional Development Authority Act 2007. The primary objective of IRDA is to realise the vision of developing Iskandar into a strong and sustainable metropolis of international standing. Accordingly, IRDAs main focus and roles are: Establishing policies, directions and strategies that have a direct impact on development activities within Iskandar Coordinating the performance of the activities carried out by Government entities in Iskandar Promoting, stimulating, facilitating and undertaking development in Iskandar Acting as a one-stop centre to deal with investors and responding to investors needs in a timely and efficient manner
3.
what are the key proMoted sectors in iskandar?
Six service-based sectors have been identified as new pillars to strengthen existing economic sectors in the region. These will support the attainment of greater long-term growth and stability for the Iskandar economy. The six targeted service-based sectors (as identified in the Comprehensive Development Plan) are as follows: Creative Education Financial advisory and consulting Healthcare Logistics Tourism Companies undertaking qualifying activities within the above sectors in the approved node within Iskandar will be eligible to apply for IDR-status.
pg.
4.
what is an idr-status coMpany?
An IDR-status company is a company incorporated under the Companies Act 1965 and approved by MOF and resident in Malaysia which undertakes a qualifying activity in the approved node within Iskandar for customers located within the approved node and outside Malaysia or wholly for customers outside Malaysia. The qualifying activities will be related to the following 6 categories of service-based sectors: Creative Education Financial advisory and consulting Healthcare Logistics Tourism
5. what are the beneFits oF an idr-status coMpany?
Subject to the fulfillment of the pre-requisite criteria set out by IRDA, IDR-status companies will enjoy: Exemption from the Foreign Investment Committee (FIC) rules Flexibilities under the foreign exchange administration rules as follows: Make and receive payments in foreign currency with residents; Borrow any amount of foreign currency from licensed onshore banks and nonresidents; Invest any amount in foreign currency assets onshore and offshore; and Retain export proceeds offshore. Unrestricted employment of foreign knowledge workers Eligibility for tax incentives
6. what are the tax incentives available For an idr-status coMpany?
The tax incentives are: Exemption from corporate income tax for a period of 10 years in respect of statutory income derived from qualifying activity carried out within the approved node for customers situated within the approved node and outside Malaysia or wholly for customers outside Malaysia. Such activities must commence on or before 31 December 2015; and Exemption from compliance with the withholding tax provisions on payment of royalty and services fee to non-residents for a period of 10 years from commencement of operations.
7.
can other coMpanies in iskandar (e.g. non idr-status coMpanies) which do not carry out any oF the QualiFying activities enJoy tax incentives?
Yes, such companies may apply for existing tax incentives which are currently available subject to the fulfilment of the pre-requisite criteria. Please visit MIDAs website at www. mida.gov.my for further information.
8. can eMployers hire Foreign/expatriate eMployees?
Yes, it will be possible to employ foreign/expatriate employees with relative ease where such employees are required. For IDR-status companies, approved developers and approved development managers, they are freely allowed to employ foreign knowledge workers.
9. what are the incentives For a Foreign knowledge worker in iskandar?
Foreign knowledge workers in Iskandar will be able to import or purchase locally a duty free car for their personal use. pg. 100
frequently asked questions (faQs)

10. will Foreigners / Foreign knowledge workers working in iskandar enJoy any incoMe tax incentives?
No, they will not enjoy any special income tax incentives/exemption. These individuals will be subject to the general income tax law.
11. what is the governMents policy on Foreigners working in Malaysia?
While foremost on the national agenda is the development and training of a skilled and capable workforce among Malaysians, the Government recognises that in some instances, foreign expertise and labour are required. Therefore, a foreigner may work in Malaysia provided that the pre-requisite criteria are met such as the qualification of the foreign individual, the profile of the employer and the sector/industry. No restriction will be imposed on IDR-status companies, approved developers or approved development managers with respect to hiring of foreign knowledge workers.
12. what approvals are reQuired For Foreigners intending to work in Malaysia?
All foreigners who intend to work in Malaysia must first obtain the necessary permit or pass from the Immigration Department of Malaysia. The type of permit or pass required depends on which of the following 3 categories the foreigner falls into: expatriate personnel, who require an Employment Pass; foreign unskilled/semi-skilled workers, who require a Visit Pass (Temporary Employment); and foreign skilled workers, who require a Visit Pass (Professional). The necessary permit or pass is to be obtained before the individual comes to Malaysia. Further information can be obtained at http://www.imi.gov.my.
13. can a Foreigner work on a short-terM attachMent?
Artists, missionaries, experts or volunteers are allowed to work on a short-term basis after having obtained a Visit Pass (Professional). The validity of the Visit Pass (Professional) varies but under normal circumstances, it will not exceed 12 months. The applicant must be outside Malaysia when the application is made. Entry will only be allowed upon approval of the pass.
14. i have Foreign visitors who will be arriving in Malaysia For Meetings. do they need to apply For visit passes?
Foreign visitors entering the country with a valid passport and visa can obtain a Visit Pass (Business) which is issued solely for the purpose of a social and/or business visit such as: owners and company representatives entering Malaysia to attend a company meeting or seminar, to inspect the companys accounts or to ensure the smooth running of the company investors or businessmen entering to explore business opportunities and investment potential foreign representatives of companies entering Malaysia to introduce goods for manufacture in Malaysia, but not to engage in direct selling or distribution property owners entering Malaysia to negotiate, sell or lease properties foreign reporters from mass media agencies entering Malaysia to cover any event in Malaysia participants in sporting events
A Visit Pass (Social) cannot be used for employment. pg. 0

15.
what are the iMMigration procedures For travel to and FroM singapore?
The travel procedures and immigration requirements are currently unchanged. However, the Governments of Malaysia and Singapore are currently working on a simplified immigration procedure.
16. is iskandar a duty Free zone?
Iskandar, as a whole, is not a duty free zone. However, there are certain areas within Iskandar which have been accorded free zone status.
17. are Malaysians entitled to operate in iskandar?
Yes, Iskandar is open to all Malaysians. In order to qualify for IDR-status, Malaysian-owned companies are subject to the same criteria as other parties.
18. is there a 30% buMiputra eQuity reQuireMent For idr-status coMpanies?
No, IDR-status companies are not required to have 30% Bumiputra equity.
19. what should a coMpany do iF it would like to apply For idr-status?
All enquiries can be directed to IRDA by sending an e-mail to enquiries@irda.com.my

20. are there distinct rules For incorporation oF coMpanies in iskandar, or do the norMal rules under the coMpanies act 1965 apply?
The Companies Act 1965 and all the relevant procedures will similarly apply to all companies operating in Iskandar. There are no special incorporation rules for IDR-status companies.
21. are idr-status coMpanies, approved developers and approved developMent Managers or other coMpanies operating in iskandar which enJoy tax incentives reQuired to File tax returns?
Yes, the tax administration system for all companies operating in Iskandar is the same as that for all other companies operating outside Iskandar.
22. iF i have any Queries in relation to iskandar, who can i approach?
Please contact: Iskandar Regional Development Authority Level 8, Menara MSC Cyberport (Menara Sarawak) 5, Jalan Bukit Meldrum, 80300 Johore Bahru Johore, Malaysia Toll Free No : 1-800-88-3010 Tel : +607 218 3010 Fax : +607 218 3111 E-mail : enquiries@irda.com.my
pg. 102
Useful Information
useFul inForMation (Johore) useFul addresses sources oF inForMation
useful information
Useful Information (Johore)

by road Entry into Johore by road can be made via the following major routes: Johore Causeway; 2nd link North-South Expressway Federal Trunk Road (Route 1) East Coast Trunk Road (Route 3) West Coast Trunk Road (Route 5) by rail The rail service is provided by Keretapi Tanah Melayu Berhad. To check the interstate train schedule, go to http://www. ktmb.com.my by air Direct entry is via the Sultan Ismail Airport (or locally known as the Senai International Airport). It is located in the district of Johore Bahru, about 34km from the capital city of Johore Bahru. Airport limousine services are available to various destinations at fares controlled by the Government. There are also scheduled airport coach services to Johore Bahru city centre. by sea The following are the sea entry points into Johore: Johore Bahru International Ferry Terminal (Johore Bahru district) Pasir Gudang (Johore Bahru district) Kukup (Pontian district) Muar (Muar district) Tanjung Belungkor (Kota Tinggi district) Tanjung Pengelih (Kota Tinggi district)
entry points
standard cost oF living
rM Lunch at a food court Lunch at a restaurant in a 5-star hotel Burger King (Whopper) KFC (Snack plate) McDonalds (Big Mac) Pizza Hut (12-inch pizza) Sushi King (Set meals)
Note: USD1 = RM3.54
usd 1.69 - 2.82 14.11 - 28.21 2.24 2.31 1.61 7.31 - 8.72 3.92 - 8.44 pg. 05
6 - 10 50 - 100 7.95 8.20 5.70 25.90 - 30.90 13.90 - 29.90
rental costs (expatriate)
priMe urban residential area suburbs oF Johore bahru in Johore bahru (per Month) (per Month) rM usd rM usd houses Bungalow Double semi-detached Terrace 10,000 - 28,000 4,000 - 8,000 2,000 -3,500 2,821 - 7,900 1,129 - 2,257 564 - 987 423 - 846 705 - 1,834 987 - 4,232
5,000 - 10,000 2,500 - 8,500 1,000 - 2,500 1,000 - 1,500 1,900 - 3,200 2,700 - 8,500 1,411 - 2,821 705 - 2,398 423 - 705 282 - 423 536 - 903 762 - 2,398
Apartments/Condominiums 1-bedroom 1,500 - 3,000 2-bedroom 2,500 - 6,500 3-bedroom 3,500 - 15,000
Note: USD1 = RM3.54
MaJor entertainMent/shopping and recreational Facilities
Johore Bahru City Square, Plaza Kota Raya, Plaza Pelangi, Plaza Angsana, Leisure Mall, Komplek Tun Abd Razak (KOMTAR), Stulang Duty Free Zone, Holiday Plaza, Carrefour, Jaya Jusco (Permas Jaya, Tebrau City and Taman Universiti), Perling Mall, xtra Super Centre, Giant Hypermarket, Lien Hoe Complex, Plaza Tasek and Kompleks Membeli-belah Landmark.
beaches
Stulang Laut, Tanjung Piai, Rambah Beach, Punggor Beach, Minyak Beku Beach, Teluk Mahkota Beach, Tanjung Balau Beach, Desaru Beach, Batu Layar Beach, Teluk Punggai Beach, Teluk Ramunia, Teluk Endau Beach, Penyabong Beach, Air Papan Beach, Teluk Buih Beach, Tenglu Beach, Tanjung Leman Beach, Tanjung Resang Beach, Teluk Sari Beach, Teluk Gorek Beach and Teluk Sisek Beach.
health and Medical centres
There are more than 20 government and private hospitals in Johore.

islands (oFF Johore)
Rawa Island, Besar Island, Tinggi Island, Tengah Island, Sibu Island, Pemanggil Island, Aur Island, Sialu Island and Upeh Island.
higher education centres
University of Technology Malaysia University of Tun Hussein Onn Open University of Malaysia University of Tun Abdul Razak More than 15 private colleges and institutions
pg. 10
useful information
proJected population in iskandar
year Malaysia Johore Iskandar
2005 (000) 26,748 3,170 1,353
2025 (000) 39,549 5,000 3,000
average annual growth rate (%) 2.0 2.3 4.1
proJected growth rates and selected econoMic indicators with or without iskandar intervention
indicator (2005 - 2025) GDP Growth GDP Per Capita Growth Rate Productivity Growth Employment Growth unemployment Rate Population Growth
note With Iskandar Without Iskandar With Iskandar Without Iskandar With Iskandar Without Iskandar With Iskandar Without Iskandar With Iskandar Without Iskandar With Iskandar Without Iskandar
Johore iskandar rest oF state (%) (%) Johore (%) 7 5.5 4.6 3.4 4 3 2.8 2.3 (3.5) - 3 (3.5) - 6.2 2.3 2.1 8 6 3.8 3 3.3 1.7 4.3 3 (2.2) - 2.1 (2.2) - 5.2 4.1 2.9 5.2 4.7 4.7 3.5 4.2 2.8 0.9 1.8 (4.8) - 4.5 (4.8) - 6.7 0.5 1.4
proJected iMpact on selected econoMic indicators with or without iskandar intervention
with iskandar Population Size GDP (PPP) in USD billion GDP Per Capita (PPP) in USD Labour Force Employment Unemployment 3 million 93.3 31,100 1.46 million 1.43 million 1.8%
without iskandar 2.3 million 64.1 26,694 1.16 million 1.0 million 5.2%
pg. 0
Useful Addresses
priMe Ministers departMent Ministry oF Finance
Perdana Putra Building Federal Government Administrative Centre 62502 Putrajaya, Malaysia Tel : (603) 8888 8000 Fax : (603) 8888 3444 Website: http://www.pmo.gov.my
iskandar regional developMent authority (irda)
Finance Ministry Complex, Precinct 2 Federal Government Administrative Centre 62592 Putrajaya, Malaysia Tel : (603) 8882 3000 Fax : (603) 8882 3892 / 3894 Website: http://www.treasury.gov.my
south Johor investMent corporation berhad (sJic)
Level 8, Menara MSC Cyberport 5 Jalan Bukit Meldrum 80300 Johore Bahru Johore, Malaysia Tel : (607) 218 3010 Fax : (607) 218 3001 Website: http://www.idr.com.my
Ministry oF international trade and industry (Miti)
Suite 17-03A Level 17 Menara MSC Cyberport 5 Jalan Bukit Meldrum 80300 Johore Bahru Johore, Malaysia Tel : (607) 222 2320 Fax : (607) 222 3662 Website: http://www.sjic.com.my
Malaysian industrial developMent authority (Mida)
Block 10, Government Offices Complex Jalan Duta 50622 Kuala Lumpur, Malaysia Tel : (603) 6203 3022 Fax : (603) 6201 2337 Website: http://www.miti.gov.my
inland revenue board oF Malaysia (irb)
Block 4, Plaza Sentral Jalan Stesen Sentral 5 Kuala Lumpur Sentral 50470 Kuala Lumpur, Malaysia Tel : (603) 2267 3633 Fax : (603) 2274 7970 Website: http://www.mida.gov.my
royal Malaysian custoMs headQuarters
15th Floor, Block 9 Kompleks Bangunan Kerajaan Jalan Duta 50758 Kuala Lumpur Tel : (603) 6209 1000 Fax : (603) 6201 1179 Website: http://www.hasilnet.org.my
coMpanies coMMission oF Malaysia (ccM)
Royal Malaysian Customs Headquarters Ministry of Finance Complex (MOF) No.3, Perdana Boulevard Precinct 2 62592 Putrajaya, Malaysia Tel : (603) 8882 2100 Fax : (603) 8889 5901 Website: http://www.customs.gov.my
iMMigration departMent oF Malaysia
head office: 2 & 10-18th Floor, Putra Place 100 Jalan Putra 50622 Kuala Lumpur Tel : (603) 4047 6000 Fax : (603) 4047 6317 Website: http://www.ssm.com.my
Headquarters (Ministry of Home Affairs): Level 1-7 (Podium) Block 2G4, Precinct 2 Federal Government Administration Centre 62550 Putrajaya, Malaysia Tel : (603) 8880 1000 Fax : (603) 8880 1200 Website: http://www.imi.gov.my
pg. 10
useful information
Sources of Information
THE INFORMATION CONTAINED IN THIS PUBLICATION IS COMPILED FROM INFORMATION OBTAINED FROM THE FOLLOWING WEBSITES: Central Bank of Malaysia (Central Bank) Companies Commission of Malaysia (CCM) Department of Statistics Malaysia Employees Provident Fund (EPF) Foreign Investment Committee (FIC) Immigration Department of Malaysia Inland Revenue Board of Malaysia (IRB) Iskandar Regional Development Authority (IRDA) Johore State Government Johor State Investment Centre Johor Tourism Action Council Malaysian Industrial Development Authority (MIDA) Malaysian Institute of Accountants Ministry of Finance Royal Malaysian Customs Department Securities Commission of Malaysia South Johor Investment Corporation Berhad (SJIC) Social Security Organisation (SOCSO) The Malaysian Government Tourism Malaysia www.bnm.gov.my www.ssm.com.my www.statistics.gov.my www.kwsp.gov.my www.epu.jpm.my www.imi.gov.my www.hasilnet.org.my www.idr.com.my www.johordt.gov.my www.jsic.com.my www.tourismJohor.com www.mida.gov.my www.mia.org.my www.treasury.gov.my www.customs.gov.my www.sc.com.my www.sjic.com.my www.perkeso.gov.my www.gov.my www.visitmalaysia.com.my
pg. 0
glossary
agM aic asean bnM ca ccM cdp ea ecM epF epu Fca Fic Frs gst iMs-gt inceiF ioFc ipc ipo irb irda iskandar ita kprJ ldic Masb MesdaQ Mida MiFc Mipc MoF oecd ohQ osc pca pct pers rdc rpgt sc sJic socso sta std trips vat wto
Annual General Meeting Approvals and Implementation Committee Association of Southeast Asian Nations Bank Negara Malaysia Companies Act 1965 Companies Commission of Malaysia Comprehensive Development Plan Employment Act 1955 Exchange Control Notice of Malaysia Employees Provident Fund Economic Planning unit Foreign Currency Account Foreign Investment Committee Financial Reporting Standard Goods and Services Tax Indonesia-Malaysia-Singapore Growth Triangle International Centre for Education in Islamic Finance International Offshore Financial Centre International Procurement Centre Initial Public Offering Inland Revenue Board Iskandar Regional Development Authority Iskandar Development Region Income Tax Act 1967 Kumpulan Prasarana Rakyat Johor Berhad Layout Designs of Integrated Circuits Act 2000 Malaysian Accounting Standards Board Malaysian Exchange of Securities Dealing and Automated Quotation Malaysian Industrial Development Authority Malaysia International Islamic Financial Centre Intellectual Property Corporation of Malaysia Minister/Ministry of Finance Organisation for Economic Co-operation and Development Operational headquarters One Stop Centre Principal Customs Area Patent Cooperation Treaty Private Entity Reporting Standards Regional Distribution Centre Real Property Gains Tax Securities Commission South Johor Investment Corporation Social Security Organisation Sales Tax Act 1972 Schedular Tax Deduction Scheme Agreement on Trade Related Aspects of Intellectual Property Value Added Tax World Trade Organisation
deFinition
idr-status company means a company: a) ncorporated under the Companies Act 1965 and resident in Malaysia which i undertakes a qualifying activity (as approved by MOF) in designated area within Iskandar as determined by IRDA (approved node); and b) approved by MOF. approved developer means a company: a) ncorporated under the Companies Act 1965 and resident in Malaysia which purchases i or acquires any right or rights over part or the whole of the land to undertake development in an approved node in accordance with the master plan for the said node; and b) approved by MOF. approved development manager means a company: a) ncorporated under the Companies Act 1965 and resident in Malaysia appointed by i an approved developer to provide management, supervisory or marketing services in relation to the activity of the developer in an approved node in accordance with the master plan for the said node; and b) approved by MOF.
pg. 110
iskAndAr regionAl develoPment Authority lEvEl 8, mEnaRa msC CyBERpORT (mEnaRa saRawak) 5, jalan BukiT mEldRum, 80300 jOhORE BahRu jOhORE, malaysia toll Free no : 1-800-88-3010 tel FAx e-mAil website : +607 218 3010 : +607 218 3111 : enquiries@irda.com.my : www.idr.com.my
First edition: OCTOBER 2007 infORmaTiOn COnTainEd in This handBOOk is availaBlE aT www.idR.COm.my and aCCuRaTE aT ThE TimE Of pRinTing. fOR laTEsT updaTEs, lOg On TO www.idR.COm.my Published by: iskandaR REgiOnal dEvElOpmEnT auThORiTy Acknowledgement: This puBliCaTiOn is a COllaBORaTiOn amOngsT ThE fOllOwing: iskandaR REgiOnal dEvElOpmEnT auThORiTy sOuTh jOhOR invEsTmEnT CORpORaTiOn BERhad TaXand malaysia sdn Bhd Zaid iBRahim & CO

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investing in iskandar

Iskandar development regIon a strong & sustainable metropolis of international standing

Structure of Business Entities

Financing Reporting and Audit Requirements

Immigration and Employment Matters

Incentive and Support Package

Frequently Asked Questions (FAQs)

Useful Information/Addresses/Sources of Information/Glossary & Definition

capital adMinistrative divisions currency

bruNei malaysia siNGaPore iNDoNesia

MaJor econoMic activities

a Matured econoMic base and success story

selangor wilayah persekutuan negeri seMbilan

excellent living environMent and high Quality oF liFe

Sources: 1 omprehensive Development C Plan for Iskandar 2 www.johordt.gov.my 3 www.idr.com.my 4 www.sjic.com.my

Iskandar Development Region

land size population

Iskandar covers a land size of 2,217 sq km (221,634 hectares)

eastern gate developMent

1.2.3 FOuR ESSENTIAL COMPONENTS OF ISKANDAR

4-6 hr Flight Radius

2-4 hr Flight Radius

2 hr Flight Radius Jakarta

malaysIa has emerged as a dynamIc market wIth hIgh growth potentIal

laos hong kong

MyanMar thailand vietnaM caMbodia sri lanka Malaysia

1.2.2.3 Geographical Coverage

kulai Municipal council pontian district council

kota tinggi district council

pasir gudang local authorities

MukiM sg. karang MukiM serkat

singapore 690 sq.km.

a strong and sustainable Metropolis oF international standing

International Rim Positioning

Creation of Catalyst Projects

Establishment of Hard & Soft Infrastructure Enablers

IRDA as a Strong Regulatory Authority

Balanced SocioEconomic Equity

iskandar econoMy strong, diversiFied, dynaMic and global

Food and Agro Processing

Electrical and Electronics

Logistics and Related Services

Petrochemicals and Oleochemicals

Five Existing Pillars shall be reinforced

Four New Pillars to be added

the Main pillars (drivers)

Chapter 2 Legal System

Chapter 3 Business Environment

3.3 inFlation rate 3.4 interest rate 3.5 knowledge workers

Malaysia: share oF real gdp (%)

Source: ank Negara Malaysia, Department of Statistics, 9MP, IMP3 B

Malaysia: real gdp growth & per capita incoMe

GDP per Capita (RhS)

Real GDP (LhS)

Source: ank Negara Malaysia Annual Report 2006, Department of Statistics B

Malaysia: approved ManuFacturing investMent & Fdi

Approved Manufacturing Investment (LhS)

Malaysia: share oF total exports (%)

Source: ank Negara Malaysia, Department of Statistics B

gdp by industry origin 2000 - 2010

gdp by expenditure 2000 - 2010

inFlation rate trend in Malaysia

Malaysia: annual inFlation rate (%)

Chapter Exchange Controls

Chapter Financing Reporting and Audit Requirements