TRENDS & INVESTMENT TRENDS & INVESTMENT OPPORTUNITIES IN THE OPPORTUNITIES IN THE MANUFACTURING & MANUFACTURING & SERVICES SECTOR IN SERVICES SECTOR IN MALAYSIAMALAYSIA

WORLD SME CONFERENCE13th DECEMBER 2007

TRENDSTRENDS•GLOBALGLOBAL•MALAYSIAMALAYSIA

MALAYSIAN MALAYSIAN OPPORTUNITIESOPPORTUNITIES•MANUFACTURINGMANUFACTURING•SERVICESSERVICES

WORLD SME CONFERENCE13th DECEMBER 2007

MALAYSIA INTERNATIONAL TRADE & INDUSTRY’S MALAYSIA INTERNATIONAL TRADE & INDUSTRY’S AGENCIESAGENCIES

4

Small and Medium Enterprises (SMEs)

are increasingly becoming the backbone of the Malaysian economy

as well as that of many other developing countries.

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If a nation wants to achieve sustainable economic growth,

developing a group of diverse and competitive SMEs is the way to go

in future, as evidenced by the experience of the developed

countries of the world.

6

SMEs have become a force to be reckoned with, both locally and globally. According to the 2005 Census of Establishment and Enterprise, a whopping 99.2% of Malaysian business establishments is made up of SMEs, of which about 80% are micro enterprises.

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The census results further showed that SMEs are a major source of employment, providing jobs for over 5.6 million workers, which accounts for 56% of total employment, and contributed 32% of the country’s gross domestic product (GDP).

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The Malaysian Government has extended substantial support to domestic SMEs by pursuing policies, initiatives and programs that focus on strengthening the enabling business infrastructure, building the business capacity of SMEs and enhancing access to financing.

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The SMI Association of Malaysia was established in 1995 to promote and provide support to Small and Medium industries, enterprises and businesses in Malaysia to nurture growth.

It does so by organizing large-scale conferences, exhibitions, awards, road shows and trade missions, among others.

It also engages itself with dialogues with the relevant authorities in Malaysia to provide feedback to initiate better avenues, facilities and infrastructure for SMEs to grow their businesses and ensure their sustainability.

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SMI Association of Malaysia

Vision:To transform SMEs into an economic

powerhouse of the country by 2020

Mission:To instill and eventually ingrain deeply the

concept of “learning organisation” into SMEs and encourage them to be export-oriented

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Objectives of SMI Association of Malaysia

1) To advocate the interests and needs of the small medium scale industries in Malaysia.

To help promote and develop SMEs in Malaysia.

To organise SMEs into a more cohesive group with a greater voice.

To improve the efficiency, effectiveness, productivity and performance of SMEs through a series of well-planned resources development programmes and road shows.

MALAYSIAN ECONOMY

GDP Growth 5.7 % (*2nd quarter 2007)

Per Capita Income US$5,388 Inflation 2.5%Unemployment 3.5% Trade Surplus US$30.9 billion (*June 07) International Reserves US$96.8 billion (*30 Aug 07) Manufactured Exports to 80.8%Total Exports

Malaysia is the 19th largest trading nation in the world

Source: Bank Negara /Economic Report 2006/2007, Ministry of Finance

MALAYSIA’S GROSS DOMESTIC MALAYSIA’S GROSS DOMESTIC PRODUCT IN 2006PRODUCT IN 2006

Services58%

Manufacturing31.7%

Agriculture7.9%

Mining 6.6%

Construction2.5%

30.2 30.1

30.931.6 31.5 31.7

28

29

30

31

32

33

34

Sh

are

of

Man

ufa

ctu

rin

g S

ecto

r to

GD

P (%

)

2001 2002 2003 2004 2005 2006

Year

Contribution of the Manufacturing Sector Contribution of the Manufacturing Sector

to the GDP (2001 – 2006)to the GDP (2001 – 2006)

of the Manufacturing &Services Sector

PERFORMANCE

Source : MITI

TOTAL APPROVED MANUFACTURING PROJECTS

2006 –2007 (Jan-Sept)

YearNo. of

projects

Approved Investments

(US$ billion)

Domestic Foreign Total

2006 1,077 7.0 5.5 12.5

2007

(Jan-Sept)702 5.1 6.2 11.3

Total 1,779 12.1 11.7 23.8

Approved Investments In The Manufacturing Sector by Major Country

2006 – September 2007Country No. Of

ProjectsPotential

EmploymentApproved

Investments (US$Million)

Japan 123 16,784 2,823

Netherlands 17 6505 1,360

Singapore 213 21,645 1,240

USA 61 6672 1,005

Germany 37 5164 568

United Kingdom

32 1955 266

China 29 2138 50

Approved Investments In The Manufacturing Sector by Major Industry

2006 – September 2007Country No. Of

ProjectsPotential Employ

ment

Domestic Investment(US$Million)

Foreign Investment (US$Million)

Electrical & Electronic Products

286 51,002 748 5,269

Chemicals & Chemical Products

209 8,276 2,216 1,376

Plastic Products 148 10,595 208 336

Machinery Manufacturing

174 7,427 287 290

Rubber Products 59 7,493 184 213

Fabricated Metal Products

192 8,456 247 182

Transport Equipment

102 7,754 496 143

Source : MITI

TOTAL IMPLEMENTED MANUFACTURING PROJECTS

( As at 31 December 2006)

No. of projects

Implemented Investments

(USD billion)

Domestic Foreign Total

13,808 38.0 42.8 80.8

FOREIGN INVESTMENT IN MANUFACTURING PROJECTS IMPLEMENTED BY MAJOR

COUNTRY ( as at 31 Dec 2006 )

CountryNo of

ProjectsTotal Investments

(USD bil)

Japan 2,155 10.5

USA 601 9.3

Singapore 2,292 4.4

Taiwan 1,397 4.3

Germany 278 3.3

Netherlands 125 2.4

Korea 252 1.6

United Kingdom 327 1.02

Hong Kong 388 562 mil

Switzerland 95 502 mil

E & E58%

Petroleum & Petrolum Products

9%

Food 3%

Chemicals8%

Transport Equipment

7%

Basic Metal6%

Non-metallic Mineral

6%

MANUFACTURING PROJECTS IMPLEMENTEDMANUFACTURING PROJECTS IMPLEMENTEDWITH FOREIGN PARTICIPATIONWITH FOREIGN PARTICIPATION

BY MAJOR INDUSTRY, BY MAJOR INDUSTRY, (as at 31 Dec (as at 31 Dec

2006)2006)

Manufacturing Projects Approved With Participation From China,

2006 - September 2007

Source : MITI

No of ProjectsTotal Investment

(US$)

29 50.2 million

Manufacturing Projects Implemented With Participation From China

( as at 31 Dec 2006 )

Source : MITI

No of ProjectsTotal Investment

(US$)

70 138.8 million

Projects Implemented With Participation From China By Major Industry,

As At December 2006

Source : MITI

IndustryTotal Investments

(US$ Million)

Basic Metal Products 73.6

Rubber Products 12.5

Wood & Wood Products 11.4

Chemical & Chemical Products

9.8

Transport Equipment 8.9

Plastic Products 7.9

Electronics & Electrical Products

4.4

Machinery & Equipment 4.0

Major Implemented Manufacturing Projects with Participation From China,

(as at December 2006)COMPANY ACTIVIES / PRODUCTS

Rexpak Sdn. Bhd. Thermoformed plastic containers

Asia Star Printing Equipment (M) Sdn. Bhd.

Offset printing plates (recycled & new)

Nippon Motor Assemblers Sdn. Bhd.

Manufacture of motorcycles & scooters (125cc & above)

Tatt Win Rubber Industries Sdn. Bhd.

Rubber compound

Chee Kuang Ceramic Trading Sdn. Bhd.

Ceramic tiles

Source : MITI

COMPANY ACTIVIES / PRODUCTS

Ji Kang Dimensi Sdn. Bhd. Steel slabs & steel billets

K-Advance Sdn. Bhd. Veneer, wood chips & sawn timber

Intraco Biopolymer Sdn. Bhd.

Bridgeable starch resin

Kejora Teguh Sdn. Bhd. Composite stainless steel/carbon steel pipes

of the Manufacturing RelatedServices Sector

PERFORMANCE

INVESTMENTS IN APPROVED SERVICES ACTIVITIES (As at September 2007)

Source: MITI

Type of Establishment

No. of Approvals

Estimated Annual Business Spending

(USD million)

Operational Headquarters 145 410.68

International Procurement Centres

201 1,393.52

Regional Distribution Centres 17 74.63

Regional Offices 624 NA

Representatives Offices 1,402 NA

TOTAL 2,389 1,878.83

Investment Policies

• Policy on Equity Ownership• Guidelines on Repatriation of Profits

100% foreign equity ownership is allowed, irrespective of the level of exports

•Guidelines on Repatriation of Profits

No restriction imposed to foreign companies investing in Malaysia on:

• Repatriation of capital• Interest • Profits• Dividends

•Equity Guidelines

Liberalisation on Employment of Expatriates

Companies with No. of Post Eligible Duration

Foreign paid-up capital of US$ 2 million and above

Up to 10 posts

(incl. 5 key posts)

Key post-permanent

• Executive post – 10 years

• Non-Exec. post – 5 years

Foreign paid-up capital

> US$200K but <US$ 2 mil.

Up to 5 posts

(Incl. at least 1 key posts)

• Key post-permanent

• Executive post – 10 years

• Non-Exec. post – 5 years

for the Manufacturing SectorIncentives

Pioneer Status (PS)Income tax exemption, ranging from 70% to 100% of statutory income for a period of 5 to 10 years.

Investment Tax Allowance (ITA)

ITA of 60% to 100% on qualifying capital expenditure incurred for a period of 5 to 10 years.

Reinvestment Allowance (RA) Granted for 15 consecutive years commencing from

the 1st year the investment is made.

Pre-Packaged Incentives

Granted based on request of the company (negotiable) and the merits of each case

Major Incentives Provided

Import Duty and Sales Tax Exemptions

• Exemption from Import Duty on Raw Materials/Components

• Exemption from Import Duty and Sales Tax on Machinery and Equipment

Third Industrial Master Plan (2006-2020)

Malaysia – Towards

Global Competitiveness

Strategic Thrusts

Strengthening Malaysia’s position as major global trading nation

Generating investments in targeted growth areas

Integrating Malaysian companies into regional and global networks

Ensuring sustainable industrialization, with consideration of environmental and regional balance

Sustaining manufacturing sector’s significant contribution to economic growth

Strategic Thrusts

Positioning services sector as major source of growth

Facilitating development and application of technologies

Developing innovative and creative human capital

Strengthening role of private sector institutions

Creating competitive business operating environment

Investment Targets

Average Annual Investments(RM Billion)

Manufacturing

Services

2006 - 2020 27.5 45.8

Targeted Industries in Manufacturing Sectors

Non-Resourced Based Industries

Electrical and electronics Medical devices Textiles and apparel Machinery and equipment Metals Transport equipment

Targeted Industries in Manufacturing Sectors

Resourced Based Industries

Petrochemicals Pharmaceuticals Rubber and rubber

products Wood based products Oil palm-based industry Food processing

Targeted Sub-sectors in Services

• Business and professional services

• Logistics• ICT services• Distributive trade• Education and training• Construction• Health• Tourism

Measures Taken To Enhance Malaysia’sCompetitiveness

• Reduction in Corporate Income Tax- 26% in 2008 and 25% in 2009

• Enhancing the Effectiveness of the Public Delivery System (PEMUDAH)

• Establishment of the Cabinet Committee on High Impact Projects

Cont.

• Establishment of Immigration Offices in all relevant government agencies

• Abolishment of the Real Property Gains Tax ( effective 1 April 2007 )

• Establishment of the Malaysian Logistics Council and the Malaysian Services

Development Council

MALAYSIA’S COMPETITIVENESS RANKINGMALAYSIA’S COMPETITIVENESS RANKING

• 14th PREFERRED DESTINATION FOR FDI – UNCTAD 2007

• 26th MOST COMPETITIVE ECONOMY IN THE WORLD & 9th MOST COMPETITIVE COUNTRY FOR BUSINESS EFFICIENCY

World Economic Forum 2007

• TOP 3 ATTRACTIVE LOCATION FOR OFFSHORING & OUTSOURCING SERVICES

A.T. Kearney’s- Annual Global Services Location Index

(in 2005, 2006 and 2007)

• 12th RANK GLOBALLY FOR CAPITAL ACCESS

Milken Institute, USA- Capital Access Index (CAI) 2006

• 3rd CHEAPEST CITY IN THE WORLD FOR RENT OF PRIME OFFICE SPACE

King Sturge, UK- Global Industrial and Office Rents Survey 2006

• Political & Economic Stability

• Pro-business Government

• Liberal Investment Policies

• Transparent Policies

• Policy of Welcome

• Well Developed Infrastructure

• Harmonious Industrial Relations

• Trainable & Educated

Labour Force

• Quality of Life

• Good Track Record

Why Malaysia ?Why Malaysia ?

April 12, 2023 www.mida.gov.my

PERFORMANCE OF MANUFACTURING AND SERVICES SECTORS

2006

GDP (RM billion) 277.3

Contribution to GDP (%)• Manufacturing • Services

32.058.2

Share of manufactured exports (%) 76.7

Share to total employment (%)• Manufacturing• Services

29.151.3

The International Positioning for IDR

Competitive Advantage

• Political Stability• English Speaking• Proximity to Singapore• Well located for geographical diversification

Mega Trends

• Globalisation• Global Supply Chains• Push for Diversity• High Financial Liquidity

Regional Trends

• Tap into Growth of China & India

• Increased South East Asia integration (AFTA)

Fast Facts on IDR

SingaporeArea – 690 km2. Population – 4.1 mDensity – 6003

Dubai Area – 3,885 km2. Population – 1.4 m Density – 360

Hong Kong Area – 1,095 km2. Population – 6.9 m Density – 6301

ISKANDAR DEVELOPMENT REGIONArea – 2,217 km2

Population – 1.4 m Density – 631Estimated Population 2025: 3 mEstimated Density 2025: 1353

Opportunities for Arbitrage

5IDR

15S ing apore – J urong *

US D per s q. ft.

Indus trial – Averag e P ric es

5IDR

15S ing apore – J urong *

US D per s q. ft.

Indus trial – Averag e P ric es

10IDR

400S ing apore

US D per s q. ft. R es idential – Averag e P ric es

10IDR

400S ing apore

US D per s q. ft. R es idential – Averag e P ric es

Note: Figures are for 2005, sources include World Bank, MoF’s Economic Report and Khazanah’s estimates* Based on 30 year lease

4,772J ohor

9,625K uala L umpur

4,997Malays ia

26,870S ing apore

US DG DP P er C apita

4,772J ohor

9,625K uala L umpur

4,997Malays ia

26,870S ing apore

US DG DP P er C apita

** Detached house / Bungalow – Land Only

**

Present and Future Structure of South Johor Economic Region (SJER) Economy

EXISTING SECTORS Electrical and Electronics Petrochemicals and Oleo Chemicals Food and Agro Processing Logistics Services Tourism Related Services

TARGETED GROWTH SECTORS Creative Industries (ICT and Multimedia) Educational Services Financial Advisory and Consulting Services Healthcare Services

Incentives Offered- IDR for Priority Sectors

Exemption from the Foreign Investment Committee Rules;

Freedom to source capital globally; Employment of expatriates; Exemption from corporate tax for a period

of

10 years ( commence operations before end of 2015) and

Exemption from withholding tax on royalty and technical fee payments to non-

residents for a period of 10 years

Northern Corridor Economic Region The Northern Corridor Economic Regiondevelopment programme is aGovernment initiative to accelerateeconomic growth and elevate income levels in the north of Peninsular Malaysia – encompassing the states of

Perlis, Kedah, Pulau Pinang and

the north of Perak.

* The NCER initiative will span from 2007 to the end of the 12th Malaysia Plan period, i.e. 2025.

Northern Corridor Economic Region Promoted Sub-Sectors in NCER

•Paddy Farming

•Fisheries and Aquaculture

•Animal Husbandry

•Fruit & Vegetables

•Herbs, Horticulture and Premium Specialty Food

•Commercial Crops: Rubber and Oil Palm

PROMOTION• Foreign Direct Investment• Domestic Investment• Cross Border Investment• Business matching through • Enterprise Connect• Manufacturing Services

EVALUATION• Manufacturing licences

• Tax Incentives (including for R&D,

Hotel & Tourism, Training &

Manufacturing related services)• Expatriate posts • Duty Exemption• OHQ, RDC & IPC status

PLANNING Planning for industrial development• Recommend policies and strategies on industrial promotion and development• Formulation of strategies, programmes and initiatives for international economic cooperation

FOLLOW-UP/MONITORING• Assist companies in the

implementation and operation

of their projects•Facilitate exchange & co-ordination

among institutions engaged in or

connected with industrial

development

• Advisory Services

OUR FUNCTIONS OUR FUNCTIONS

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The SME International Trade Fair 2008, organized by the

SMI Association of Malaysia,

is all set to propel local Small and Medium-scale Industries, Enterprises and Businesses in Malaysia into global arena.

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The inaugural trade fair, which is to be made an annual event of SMI Association of Malaysia, is an open invitation to all SMEs and SMIs in Malaysia as well as the fast-growing ASEAN region to join forces and share access to the expertise and resources throughout the region.

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Taking into account such important facts and figures, the SME International Trade Fair 2008 is indeed a relevant platform for local and regional SMEs to showcase their products and services, to grow together on a regional as well as global basis for the benefit of all.

OUR GLOBAL NETWORK

STATE BRANCHES

SELANGOR

NEGERI SEMBILAN

Thank You

www.smisme.com

for your kind attention