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Liberalisation of the Services Sector in Malaysia

Spearheading Outsourcing Opportunities in High Tech Industries20 June 2012

CONTENT OUTLINE

Approvals of Services Projects

Role of MIDA

Promoted Activities

Services Liberalisation

FTAs

Major Incentives

2

Benefits of Liberalisation

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Investments in the Services Sector

APPROVED INVESTMENTS IN THE SERVICES SECTOR

4

2012

(Jan – Mar)2011 2010 2009 2008 2007

Number of Projects 1,197 4,006 3,305 2,730 2,780 2,632

Potential Employment 19,894 43,867 54,647 37,469 36,036 50,042

Total Proposed Capital Investment (RM billion)

17.7 70.4 37.0 38.7 50.1 66.4

- Domestic (RM billion) 12.1 52.5 32.7 35.4 44.6 55.6

- Foreign (RM billion) 5.6 17.5 4.3 3.3 5.5 10.8

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Domestic

(RM52.5 billion)

74%

26%

Foreign

(RM17.9 billion)

5

Share of Domestic Investments in the Services Sector vis-a-vis

Foreign Investments

68%

32%

Domestic

(RM12.1 billion)

Foreign

(RM5.6 billion)

20112012

Jan - Mar

MAJOR SERVICES SUB-SECTORS

6

RM Billion

20112012

Jan - Mar

16.9

11.7

9.6

6.1

6.0

9.4

Transport

Global Operations Hub

Energy

Financial Services

Real Estate

Telecommunications

Others

Education

4.9

3.93.6

1.5

1.1

0.6

TransportReal Estate

Dist. Trade

Support

Services

Global Operation

Hub

Hotel &

Tourism

Others

Energy

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Current Role of MIDA in the

Services Sector

ROLE OF MIDA IN THE SERVICES SECTOR

8

• First point of contact for information on services sector;

• Identify and coordinate the promotion of investment for specific services activities;

• Recommend appropriate policies and incentives to relevant ministries/agencies;

• Assist investors in the implementation of projects; and

• Collate statistics on investments in services sector.

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Promoted Activities in the Services

Sector

Promoted Activities in the Services Sector

10

• Integrated Logistics Services

• Supply Chain Activities

Regional Establishments

• Operational Headquarters (OHQ)

• International Procurement Centre (IPC)

• Regional Distribution Centre (RDC)

• Treasury Management Centre (TMC)

Logistics

• Technical, Vocational & Science Training Institutions

• International / Private Schools

Education

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Promoted Activities in the Services Sector

11

• Private hospitals

• Ambulatory care centres

• Hotel

• Tourist project

• Recreational camp• Convention centre

Tourism

Healthcare Travel

Promoted Activities in the Services Sector

12

Environmental Management

• Energy conservation/efficiency

• Energy generation, using renewable energy sources

• Storage, treatment and disposal of hazardous waste

• Recycling of agricultural waste and agricultural by-products

• Research & Development (R&D)

• Integrated Market Support Services

• Testing for Medical Devices

• Irradiation & Gas Sterilisation

• Industrial Design Services

Business & Other Support Services

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MAJOR INCENTIVES / FACILITIES PROVIDED

MAJOR INCENTIVES/FACILITIES PROVIDED

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� Pioneer Status - partial or full income tax exemption for a period of 5 to 10

years

� Investment Tax Allowance (ITA) ranging from 60% to 100% on qualifying

capital expenditure for a period of 5 to 10 years

� Customised incentives

� Tax and non-tax incentives according to the wish list of investors and

based on the merit of the case

� Exemption from import duty and sales tax on imported machinery,

equipment, materials, components, spare parts/replacement parts and

consumables

� Expatriate Posts

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FREE TRADE AGREEMENTS (FTAs)

COVERAGE OF BILATERAL FTAs OF MALAYSIA

16

Japan NZ Pakistan Chile India

Business Services Y Y Y N Y

Communication Services Y Y Y N Y

Construction Services y Y Y N Y

Distribution Services N N Y N Y

Education Services Y Y Y N Y

Environmental Services N Y N N Y

Financial Services Y Y Y N N

Health Services Y Y Y N Y

Tourism Services Y Y Y N Y

Recreational & Cultural and

Sporting Services

Y Y Y N Y

Transport Services Y Y Y N Y

Other Services Y Y Y N Y

Source : MITI

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REGIONAL FTAs

17

�At the regional level, Malaysia and its ASEAN partners

established the ASEAN Free Trade Area in 1992 which

focuses on trade in goods

� In 1995, ASEAN Framework Agreement of Services

(AFAS) was signed by ASEAN. The agreement aims to

establish complete liberalisation of 128 services sub-

sectors identified by WTO services classification list by

2015.

Services Sectors Identified for

Development Under the National Key

Economic Areas (NKEAs)

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ESTABLISHMENT OF 12 NATIONAL KEY ECONOMIC AREAS (NKEAs)

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Out of the 11

industry

sectors, 8 are

focusing on

services

sectors

Liberalisation of the Services Sector

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8 Broad Sectors -27 sub-sectors with no

equity condition imposed

Business

Services

Rental/Leasing

Services

Sporting &

Other

Recreational

Services

Transport

Health &

Social Services

Tourism

Supporting

& Auxiliary

Transport

Services

Finance

Transport

Computer &

Related

Services

1ST ANNOUNCEMENT – 22 APRIL 2009

Others

(i.e. Skills)

22

Computer & Related Services

Consultancy services related to the installation of computer hardware

Software implementation services

Data processing services

Data base services

Maintenance & repair services of computers

Other services – data preparation, training, data recovery & development of creative content

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23

Health & Social Services

All veterinary services

Welfare services delivered through residential institutions to old person & the handicapped

Welfare services delivered through residential institutions to children

Child day-care services including day-care services for the handicapped

Vocational rehabilitation services for handicapped

24

Tourism Services

Theme park

Convention and exhibition centre (seating capacity of above 5,000)

Travel agencies & tour operators services (for inbound travel only)

Hotel & restaurant services (for 4 & 5 star hotels only)

Food serving services (for services provided in 4 & 5 star hotels only)

Beverage serving services for consumption on the premise (for services provided in 4 & 5 star hotels only)

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25

Transport Services

Class C freight transportation

(Private Carrier Licence – to transport own goods)

Sporting & Other Recreational Services

Sporting Services

(Sports event promotion & organisation services)

26

Business Services

Regional Distribution Centre

International Procurement Centre

Technical testing & analysis services

Management consulting services

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27

Rental/Leasing Services

Rental/leasing services of ships that exclude cabotage& offshore trades

Rental of cargo vessels without crew (bareboat charter) for international shipping

Supporting & Auxiliary Transport Services

Maritime agency services

Vessel salvage & refloating services

7 Broad Sectors -17 + 1* sub-sectors allowed up

to 100% foreign equity

Healthcare

Distributive

Trade

Professional

Services

Education

Telecomm.

Services

Courier

Services

Environmental

Services

Finance

*An additional sub-sector identified under the SRI Lab : Quantity Surveying Services

Computer &

Related

Services

2nd ANNOUNCEMENT – 7 OCT 2011

Others

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Status of Liberalisation

No. of Sectors Implemented In Progress

17 + 1 9 (50%) 9 (50%)

Implemented In Progress

Telecommunication – ASP Legal Services (40%)

Tech & Vocational Schools Telecommunications (NSP & NFP)

(70%)

Tech & Vocational Schools – Special

Needs

Private Universities

Private Hospitals International Schools

Departmental & Specialty Stores Medical Specialist Services

Incineration Services Dental Specialist Services

Accounting/Taxation Architectural Services

Skills Training Centres Engineering Services

Courier Services Quantity Surveying Services

Benefits of Liberalisation

30

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BENEFITS OF LIBERALISATION

31

� Ability to attract foreign direct investments;

� Encourage transfer of specialized expertise and technology into

the services sectors;

� Allow opportunity for Malaysian companies to expand out of

domestic market and enter into the regional markets or global

markets;

� Create higher value employment opportunities; and

� Inject competitiveness in the services sector in Malaysia.

Thank You