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| SABAH
INVESTMENT INCENTIVES & POLICIES |
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Foreign
Equity |
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Equity
Policy in the Manufacturing Sector
The Malaysian Government welcomes foreign
investment in the manufacturing sector. In keeping with the objective
of increasing Malaysian participation in manufacturing activities,
it is the policy of the Government to encourage projects to be undertaken
on a joint-venture basis between Malaysian and foreign entrepreneurs.
Foreign Equity Participation
Foreign equity participation in manufacturing
projects are governed by the following guidelines:
(a) No equity condition will be imposed on projects that export 80%
or more of their production.
(b) The level of equity participation for other export-oriented projects
are as follows:
For projects exporting between 51% to 79% of their production, foreign
equity ownership of up to 79% may be allowed, depending on factors
such as the level of technology, spin-off effects, size of the investment,
location, value-added and the utilization of raw materials and components.
For projects exporting between 20% to 50% of their production, foreign
equity ownership of between 30% to 51% will be allowed, depending
on the factors as mentioned above.
For projects exporting less than 20% of their production, foreign
equity ownership is allowed up to a maximum of 30%.
However, foreign equity ownership of up to 100% may be allowed for
projects producing products that are of high technology or are priority
products for the domestic market as determined by the Government from
time to time.
Additionally, the above guidelines will not apply to certain products
or activities where there are limits on the maximum level of foreign
equity ownership. Please contact the nearest office of the Malaysian
Industrial Development Authority (MIDA) to check on the equity policy
on specific products/activities.
(c) For projects which involve the extraction or mining and processing
of mineral ores, majority foreign equity participation of up to 100%
is permitted. In determining the percentage, the following criteria
will be taken into consideration:
The Level of investment, technology and risk involved in the projects
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The availability of Malaysian expertise in the area of exploration,
mining and processing of the minerals concerned; and
The degree of integration and level of value-added involved in the
projects.
Distribution of Malaysian Equity
Where foreign equity is less than 100%, the balance
of the equity to be taken up by Malaysians should be allocated according
to the following guidelines:
(a) For projects initiated by foreigners and where no local partners
have been identified:
If 70% or more of the equity is held by foreigners, the balance of
the equity will be reserved for Bumiputeras.
If less than 70% of the equity is held by foreigners, 30% will be
reserved for Bumiputeras, and the balance for non-Bumiputeras.
For example, if foreigners hold 60% of the equity, 30% will be reserved
for Bumiputeras and the remaining 10% for non-Bumiputeras. If the
equity reserved for Bumiputeras is not taken up, the Ministry of International
Trade and Industry (MITI) will allocate part of the balance to non-Bumiputeras.
(b) For projects initiated by Bumiputeras on a joint-venture basis
with foreigners:
If 70% or more of the equity is held by foreigners, the balance of
the equity will be reserved for the Bumiputeras concerned.
If less than 70% of the equity is held by foreigners, the balance
will be reserved for Bumiputeras. However, if Bumiputeras are unable
to take up the entire balance, MITI will allocate part of the balance
to non-Bumiputeras.
(c) For projects initiated by non-Bumiputeras on a joint-venture basis
with foreigners :
If 70% or more of the equity is held by foreigners, the balance of
the equity will be allocated to the non-Bumiputeras concerned.
If less than 70% of the equity is held by foreigners, 30% will be
allocated to the non-Bumiputeras concerned and the balance will be
reserved for Bumiputeras. However, under special circumstances, the
non- Bumiputeras may be permitted to take up the entire balance of
the equity as decided by MITI. |
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Production
of Foreign Investment
Equity Ownership
A company that has been approved with a certain
equity participation will not be required to restructure its equity
at any time, notwithstanding the fact that the company may have
undergone an expansion or diversification, provided that the company
continues to comply with the original conditions of approval and
retains the original features of the project.
Investment Guarantee Agreements
Malaysia's readiness to conclude Investment
Guarantee Agreements ( IGAs ) is a testimony of the Government's
desire to increase the confidence of foreign investors in Malaysia.
An IGA will provide the foreign investors with the following:
Protection against nationalisation and expropriation.
Prompt and adequate compensation in the event of nationalisation
or expropriation.
Free transfer of profits, capital and other fees. Settlement of
investment disputes under the convention on the Settlement of Investment
Disputes of which Malaysia has been a member since 1966. MITI issues
letters of coverage under the respective IGAs to approved projects
in Malaysia.
Malaysia has concluded Investment Guarantee Agreements with the
following countries (in order of precedence) : United States of
America, Federal Republic of Germany, Canada, Netherlands, France,
Switzerland, Sweden, Belgo-luxembourg, United Kingdom, Sri Lanka,
Romania, Norway, Austria, Finland, Organisation of Islamic Countries
(OIC), Kuwait, Association of South-East Asian Nations (ASEAN),
Italy, Republic of Korea, People's Republic of China, United Arab
Emirates, Denmark, Socialist Republic of Vietnam, Papua New Guinea,
Chile, The Lao People's Democratic Republic, Taiwan, Hungary, Poland,
Indonesia, Albania, Zimbabwe, Turkmenistan, Namibia, Cambodia, Argentina,
Jordan, Bangladesh, Croatia, Bosnia Herzegovena, Spain, Pakistan,
Kyrgyz Republic, Mongolia and Uruguay.
Convention on the Settlement of Investment
Disputes
In line with the national policy of promoting
and protecting foreign investment, the Malaysian Government in 1966
ratified the provisions of the Convention on the Settlement of Investment
Disputes established under the auspices of the International Bank
for Reconstruction and Development (IBRD).
Facilities for international conciliation or arbitration are established
by the Convention through the International Centre for Settlement
of Investment Disputes which is located at the principal office
of the IBRD in Washington.
Regional Centre for Arbitration
The Kuala Lumpur Regional Centre for Arbitration
was established in 1978 under the auspices of the Asian-African
Legal Consultative Committee (AALCC) - an inter-governmental organisation
in cooperation with the assistance of the Government of Malaysia.
The Centre serves the Asian and Pacific region. It is a non-profit
organisation and has been established with the objective of providing
a system for the settlement of disputes for the benefit of parties
engaged in trade, commerce and investment within the region.
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