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FY 1999: Malaysia |
CHAPTER VII: INVESTMENT CLIMATEOpenness To Foreign Investment
The Malaysian government encourages direct foreign investment particularly in export-oriented manufacturing and high-tech industries, but retains considerable discretionary authority over individual investments. Especially in the case of investments aimed at the domestic market, it has used this authority to restrict foreign equity and to require foreign firms to enter into joint ventures with local partners.
Currently Malaysia is actively wooing foreign investments in the multimedia and information technology industries to facili- tate the establishment of the Multimedia Super Corridor project. However, it does not actively seek foreign investment in service industries or foreign participation in agriculture or construction. Investment is also restricted in the oil and gas industry.
Proposals for a manufacturing license, either foreign or local, are screened by the Malaysian Industrial Development Authority (MIDA) to determine whether they are consistent with the Second Industrial Master Plan (1996-2005) and government strategic and social policies. Applications for investment in other sectors would be handled by relevant regulators. For example, a re-insurance firm requires the approval of Bank Negara Malaysia (the central bank).
Investment regulations are specified in the Promotion of Investments Act 1986 and the Industrial Coordination Act 1975. On acquisitions, mergers and takeovers, the Securities Commission and the Foreign Investment Committee implement the regulations specified in the Malaysian Code on Take-overs and Mergers. The Foreign Investment Committee also formulates policy guidelines for foreign participation in the non-manufacturing sector.
General policy limits foreign equity to a minority 30% share, but 100% foreign ownership in manufacturing is permitted in certain instances for export-oriented industries (see Appendix A at the end of this chapter). Foreign companies which are granted Multimedia Super Corridor (MSC) status are also permitted 100% ownership. Malaysia also promotes the holding of economic assets by Bumiputera (ethnic Malays) and usually requires foreign and domestic firms to take on Bumiputera partners (usually 30%) and to have a workforce which reflects Malaysia's ethnic composition. Appendix E provides a definition of Bumiputera firms. Malaysia offers a number of fiscal incentives to foreign manufacturing investors (Appendix B), which may be linked to performance requirements. Incentives are also offered to foreign companies with MSC status (Appendix C).
Approval depends on the size of the investment, percent of local equity participation, the type of financing (both local and offshore) required, capital/labor ratio, the ability of existing and planned infrastructure to support the effort, and the existence of a local or a foreign market for the output. The criteria are applied in a nondiscriminatory manner, except in the rare instance when a local and a foreign firm propose identical projects.
Foreign direct investors established in Malaysia are generally accorded national treatment in all but equity limits. Foreign portfolio investors are permitted to trade freely in both equity and debt on the local exchanges and to purchase available stock in newly privatized firms during an initial public offering. An exception is made for commercial banks, though, where foreign equity is limited to 30% in aggregate. For virtually all publicly listed companies, only a minority portion of stock is available for trading; the majority is often held by the principal share- holders. Malaysia has a robust privatization program and foreign participation is generally welcome at all stages. Foreign firms are able to participate in government-financed research and development programs.
Right To Ownership and Establishment
Generally, a foreign partner is allowed to hold a maximum 30% stake in Malaysian companies. Foreign ownership in local fund management companies was raised to 70% for companies working with both local and foreign clients and dealing with both institutional and unit trust funds. Foreign ownership in stockbroking companies has been allowed to reach as high as 49%. Malaysia has temporarily eased equity restrictions on foreign ownership of licensed tele- communications companies. Under new measures announced in May 1998, foreigners may own up to a maximum of 61% equity in telecommuni- cations companies, but must through divestiture or dilution of shares not exceed 49% after five years.
As part of Malaysia's WTO financial services offer, the govern- ment committed to allow existing foreign shareholders of locally incorporated insurance companies to increase their shareholding to 51%, once the WTO financial services offer goes into effect in 1999. In May 1998, Malaysia's Prime Minister announced that a large U.S. insurance company would receive a five-year grace period beyond the original deadline of June 30, 1998, to divest down from 100% foreign ownership to 51%. The Prime Minister also indicated that other foreign majority owned insurance companies would have the same leeway. Bank Negara Malaysia, the insurance regulator, has not, however, issued written guidelines subsequent to the Prime Minister's statement. Under the Insurance Act of 1996, foreign insurance subsidiaries were also required to locally incorporate their operations by June 30, 1998. Post understands that the GOM may consider requests for extensions of this deadline.
In addition to the standard 30% cap on foreign equity, certain financial industries have additional barriers to entry. For example, the Government severely restricts establishment in the financial service industry. No new banking, stockbroking or insurance licenses, except for re-insurance firms, are being issued. Foreign firms wishing to enter this market may purchase equity in existing firms.
Foreign ownership in local television is strictly forbidden, and 60% of television programming must originate from local companies owned by ethnic Malays. Sixty percent of radio pro- gramming must be of local origin. Ownership of agricultural land is restricted to Malaysian citizens. Under the terms of the Petroleum Development Act of 1974, the upstream oil and gas industry is the province of the parastatal Petroleum Nasional Berhad (Petronas), which is the sole entity with legal title to Malaysian crude oil and gas deposits.
Over time, a number of foreign firms selling their products and services into the domestic market have received licenses with limited-term exemptions to the standard limit of 30% foreign equity. As these exemptions expire or the licenses come up for renewal, government agencies require foreign firms to demonstrate substantial progress towards meeting the foreign equity limits. A restructuring program may involve taking on new local partners, giving existing local partners a greater equity share or floating shares on the Kuala Lumpur Stock Exchange. In the end, the principal foreign partner is expected to have no more than 30% of the business.
Private entities, both foreign or domestic, have a right to acquire, merge and take over business enterprises according to the Foreign Investment Committee (FIC) Guidelines of 1974. However, the acquisition or disposal of five percent or more of interests in any local financial institution requires the prior approval of the Minister of Finance.
Protection of Property Rights
Malaysia has an effective legal system and adequate legis- lation to protect private property. Foreigners are permitted to purchase and secure mortgages from financial institutions for property, chattel and real estate in Malaysia, with the exception of agricultural land and residential properties valued less than RM250,000 (US$62,500). However, certain equity restrictions apply in the purchase of commercial property.
Malaysia has a strong regime for protecting Intellectual Property Rights (IPR). IPR are covered by the Trade Description Act of 1972, the Patent Act of 1983, the Copyright Act of 1987 and the Industrial Designs Act of 1996. In May 1997, four new pieces of legislation passed the lower house of Parliament which extend IPR protection especially to new cyberspace applications. The laws cover computer crimes, digital signature, telemedicine, and include a revision of the Copyright Act. In addition, Malaysia has acceded to both the Berne and Paris Conventions, and is a member of the World Intellectual Property Organization.
Police and legal authorities are generally responsive to requests from U.S. firms for investigation and prosecution of copyright infringement cases. Nevertheless, pirated videotapes, video compact discs and computer software are often sold openly in small stores and street markets. A new and growing source of concern is the establishment of a number of plants reportedly manufacturing pirated CD's (audio and visual) and CD-ROMs in Malaysia. The Malaysian government is aware of the problems and has expressed its determination to move against illegal operations.
Patents registered in Malaysia generally have a 15-year duration, but this can be extended under certain circumstances. Although the processing time for trademark registration may be as long as 18 months, infringement has not been a problem. Copyright protection extends to computer software, and lasts for 50 years.
The Copyright Act includes enforcement provisions allowing Government officials to enter and search premises suspected of infringement, and to seize infringing copies and reproduction equipment.
Malaysia has stepped up action against both software and video pirates in 1997.
Malaysia's revised Copyright Act includes provisions imple- menting the WTO TRIPS agreement.
Major Taxation Issues Affecting U.S. Business
A company is a tax resident in Malaysia if its management and control is exercised in Malaysia. Management and control is normally considered to be exercised at the place where the directors meetings are held. Resident companies pay an income tax of 28% on all income. Payments made to non-residents in respect of technical or management services and rental of movable properties are subject to withholding tax at the rate of 10%.
Tax is normally collected within 30 days after the issuance of a notice of assessment by the tax authorities. However, companies are required under the compulsory tax payment scheme to pay tax in bimonthly installments for each assessment year commencing from the month of January or February based on an estimate of tax payable. Tax on royalties, rental of movable properties, technical or management service fees and interest received by non-resident companies are collected by means of withholding tax. The withholding tax is payable within one month of crediting or paying the non-resident company, whichever is earlier.
Performance Requirements and Incentives
Fiscal incentives, granted to both foreign and domestic investors, are subject to performance requirements, usually in the form of export targets, local content requirements, and technology transfer. Performance requirements are often written into the manufacturing license of both local and foreign investors. If a firm (foreign or domestic) fails to meet the terms of its license, it risks losing any tax benefits it may have been awarded. In extreme cases, the firm could lose its manufacturing license. The Government has stated that, over the long term, it intends to eliminate gradually most of the fiscal incentives now offered to foreign and domestic manufacturing investors.
Appendix A describes the conditions of foreign equity structure and Appendix B the investment incentives in the manufacturing industry. Appendix C lists the incentives for the MSC.
Transparency of the regulatory system: laws and procedures Malaysia has an open system of Government economic and business regulation. For tax purposes, local and foreign enterprises are treated on essentially the same footing. The corporate tax rate is 28%, except in petroleum production which is taxed at 40%.
The Malaysian Government restricts the number of expatriate personnel employed by foreign and domestic firms (Appendix D). In addition, the Government monitors hiring practices to ensure that all employers strive to meet guidelines designed to ensure a racial balance in employment. Foreign firms complain the pro- cedures for work permits are time consuming and burdensome. Due to the acute shortage of professionals, scientists and academi- cians, Malaysia has made some progress in simplifying the approval process of work permits for these categories of foreign workers. From May 1, 1997, the new procedure allows the relevant Ministries to approve the work permits of the foreign professionals, and then forward them to the Immigration Department for issuance of the required documents.
Corruption
Malaysia reacts quickly to allegations of corruption. The Malaysian Government has set up the AntiCorruption Agency (ACA) to combat corruption by officials. In June 1997, the Government directed senior state-level officials to declare their assets to the ACA upon taking office. Foreign businessmen are asked to report any individuals who ask for payment in return for government services. A 1997 survey by Transparency International, a nonprofit organization, ranked Malaysia ahead of countries such as South Korea, Thailand, China, the Philippines and Indonesia, but behind others such as Singapore, Japan, Hong Kong and Taiwan. ACA probes are reported in the newspapers. There is no evidence to suggest widespread corruption, although news reports and anecdotes indicate that corrupt practices exist. Malaysia considers bribery a criminal act and does not permit bribes to be deducted from taxes.
Labor
The Malaysian economy at end-of-1997 was technically at full employment at 2.7%, virtually unchanged from 2.5% in 1996, however, the GOM's forecast for unemployment at the end of 1998 is 3.5%. The recent economic downturn has led to notable retrenchments, particularly in the manufacturing sector, and generally speaking local and foreign firms are having less difficulty obtaining and retaining workers at all skill levels. In August 1997, the govern- ment -- in apprehension of rising unemployment -- announced that it would no longer issue work permits to foreign unskilled workers and would no longer renew work permits for those foreigners whose contracts had expired. However, this policy has recently been relaxed.
In recent years wage rates have climbed faster than productivity rates and the government, in an effort to compete with neighbors for foreign investment, has urged manufacturers to increase productivity and efficiency. The National Labor Advisory Council, a tripartite forum, has introduced a set of guidelines on a productivity linked wage system to facilitate the negotiations of collective wage agreements. Malaysia no longer seeks labor- intensive industries and reserves its fiscal incentives for high value added projects. It encourages labor intensive industries to move offshore.
Malaysia is a member of the ILO. Labor relations in Malaysia are generally good, and Malaysian labor unions, which account for less than 10% of the workforce, act responsibly. The Govern- ment discourages strikes through a system of controls which promote settlement through negotiation or arbitration by the Industrial Court. Once a case is referred to the Industrial Court, the union and management are barred from further industrial action.
There are a number of national unions, but the Malaysian Govern- ment prohibits the formation of a national union in the electronics industry, a major employer, although it does allow for in-house unions in the electronics industry. Employers and employees share the costs of the Social Security Organization (SOSCO), which covers 7.9 million workers as of June 1997. No welfare programs or govern- ment unemployment compensation benefits exist; however, the Employee Provident Fund (EPF) provides retirement benefits for most workers.
Efficiency of Capital Markets and Portfolio Investment
Broadening and deepening the domestic capital market are major Malaysian Government priorities. To foster development, monetary authorities grant local and foreign private firms liberal access to a variety of credit instruments. Credit is, in general, allocated on market terms. One exception is a requirement that local and foreign banks loan a small portion of their funds at a specified rate of interest (currently nine percent) to Malaysian citizens purchasing low-cost housing.
Foreign investors have access to credit on the local capital market, but are required to source at least 60% of local borrowings from a domestic bank.
Central Bank permission is required for ringgit financing over RM10 million (US$2.5 million). Foreign stockbroking firms and foreign correspondent banks are limited to an aggregate maxi- mum of RM5 million (US$1.25 million) in ringgit credit facilities from Malaysian banking institutions to fund the mismatch of receipts and payments through their external accounts.
Malaysia imposes no restrictions on foreign portfolio investment. The Malaysian Government has an adequate regulatory system to facilitate portfolio investment.
International concern has arisen recently towards Malaysia's financial and accounting transparency. A Central Depository System for stocks and bonds began in 1991 and will make physical possession of certificates unnecessary.
The domestic banking system has come under increasing stress as a result of the current regional economic crisis. As of December 1997, the commercial banks held assets totaling US$ 171 billion. The assets of the top five commercial banks were estimated at about US$ 59 billion. Total non-performing loans increased from 5.7% at the end of 1997 to 9.1% at the end of March 1998 and are expected to peak at around 20% at the end of 1998, well below the 30% level reached during recession in the 1980s.
Conversion and Transfer Policies
Malaysia has a relatively open foreign exchange regime. Payments, including repatriation of capital and remittance of profits or dividends, are freely permitted and are transacted on a timely basis. All payments to other countries may be made in any foreign currency other than the currency of Israel, Serbia or Montenegro through authorized foreign exchange dealers. Non-residents are also allowed to open foreign currency and ringgit accounts freely.
Resident exporters and approved Operational Headquarters are allowed to retain a maximum of US$10 million in export proceeds in foreign currency accounts. A traveler may carry any amount of ringgit or any foreign currency when he leaves or arrives in Malaysia.
There is no indication that there are any discrepancies between Malaysia's stated exchange policy and its implementation.
Expropriation and Compensation
The Embassy is unaware of any cases of uncompensated expropriation of foreign-held assets by the Malaysian Government. The Government's stated policy is that all investors, both foreign and domestic, are entitled to fair compensation in the event that their private property is required for public purposes. Should the investor and the Government disagree on the amount of compensation, the issue would be referred to the Malaysian judicial system, which has proved capable of enforcing property and contractual rights.
Dispute Settlement
Malaysia is signatory to the U.N.-sponsored Convention on the Settlement of Investment Disputes. The domestic legal system is open and accessible. Past cases of foreign investment disputes, which have been rare, have consistently been handled satisfactorily by existing dispute settlement mechanisms. Many firms chose to include mandatory arbitration clauses in their contracts.
Two public cases have raised allegations of judicial impropriety. The "Ayer Molek" case in 1996, seemingly a simple shares transaction, eventually resulted in the Federal Court issuing a public rebuke to appellate judges. In July 1996,a Federal Court judge resigned over "poison-pen letters" alleging judicial misconduct and corruption. Should local administrative and judicial facilities fail to satisfy claimants, a dispute would be submitted to the International Center for Settlement of Investment Disputes (ICSID) under the aegis of the United Nations. The Government has set up the Kuala Lumpur Regional Centre for Arbitration to offer international arbitration, mediation and conciliation for trade disputes.
Political Violence
Political violence is virtually unknown in Malaysia, other than the ethnic violence of 1969.
Bilateral Investment Agreements
Malaysia has bilateral investment guarantee agreements with 51 countries and country groupings: U.S.A. (1959), Germany (1960), Canada (1971), Netherlands (1972), France (1975), Switzerland (1978), Sweden (1979), Belgium and Luxembourg (1979), United Kingdom (1981), Sri Lanka (1982), Romania (1982), Norway (1984), Austria (1985), Finland (1985), Organization of Islamic Conference (1987), Kuwait (1987), ASEAN (1987), Italy (1988), South Korea (1988), People's Republic of China (1988), United Arab Emirates (1991), Denmark (1992), Vietnam (1992), Papua New Guinea (1992), Chile (1992), Laos (1992), Taiwan (1993), Hungary (1993), Poland (1993) Indonesia (1994), Albania (1994), Zimbabwe (1994), Turkmenistan (1994), Namimbia (1994), Cambodia (1994), Argentina (1994), Jordan (1994), Bangladesh (1994), Croatia (1994), Bosnia-Herzegovina (1994), Spain (1995), Pakistan (1995), Kyrgyz (1995), Mongolia (1995), Uruguay (1995), India (1995), Peru, Kazakhstan (1996), Malawi (1996), the Czech Republic (1996) and Egypt (1997).
Malaysia has a limited Investment Guarantee Agreement with the United States under the U.S. Overseas Private Investment Corporation (OPIC) program. Efforts to negotiate a more compre- hensive Bilateral Investment Treaty still require resolution of several issues, the most important of which is differing inter- pretations of national treatment.
Malaysia has double taxation treaties with 47 countries: Singapore (1968, 1973), Japan (1970), Sweden (1970), Denmark (1970), Norway (1970), Sri Lanka (1972), United Kingdom(1973), Belgium (1973), Switzerland (1974), France (1975 and 1991), New Zealand (1976), Canada (1976), India (1976), Germany (1977), Poland (1977), Australia (1980), Thailand (1982), South Korea (1982), Philippines (1982), Pakistan (1982), Romania (1982), Bangladesh (1983), Italy (1984), Finland (1984), German Democratic Republic (1985), People's Republic of China (1985), Commonwealth of Independent States (1988), Netherlands (1988), U.S.A. (1989), Hungary (1989), Austria (1989), Yugoslavia (1989), Indonesia (1991), Mauritius (1992), Iran (1992), Papua New Guinea (1993), and Saudi Arabia (1993), Sudan (1993), Republic of Albania (1994), Zimbabwe (1994), Turkey (1994), Jordan (1994), Mongolia (1995), Vietnam (1995), Malta (1995), United Arab Emirates (1995), Fiji (1995), the Czech Republic (1996), Kuwait (1997), and Egypt (1997).
With the United States, Malaysia has a tax agreement limited to air and sea transportation. However, discussion about a comprehensive agreement continued in 1998.
OPIC and Malaysia
Since 1959, Malaysia has qualified for the U.S. Overseas Private Investment Corporation (OPIC) insurance programs. However, given Malaysia's political stability, attitude towards foreign investors and available dispute settlement mechanisms, few investors have sought OPIC insurance in Malaysia. As Malaysia begins to attract more small and medium sized investors, there may be greater potential for U.S. firms to take advantage of OPIC's direct loan program.
Foreign Investors
The U.S. has consistently been a leading investor in Malaysia. According to the Malaysian Investment Development Authority, the U.S. was the largest foreign investor in the manufacturing sector with projects valued at US$853 million in 1997. Japan was next with US$770 million, followed by Germany's US$644 million. The three countries made up more than half of total foreign manu- facturing investments in Malaysia. (Note: manufacturing investment only; upstream oil and gas investments not included.)
U.S. firms with significant investment in Malaysia include: Exxon and Occidental Petroleum, which participate in upstream and downstream activities, Mobil, Caltex, Conoco, Union Carbide, Eastman Chemical and Amoco in downstream activities, all major semiconductor manufacturers (e.g. Motorola, Texas Instruments, Intel, National Semiconductor, Harris), a number of computer component makers (e.g. Seagate, Komag), the toymaker Mattel and the medical products manufacturer Baxter International. Virtually all the major Japanese consumer electronics firms (Sony, Fuji, Panasonic, Matsushita, Hitachi etc.) have facili- ties in Malaysia.
Malaysia encourages direct foreign investment particularly in export-oriented manufacturing and high tech industries, but retains considerable discretionary authority over individual investments. Investments which are concentrated in the domestic market, use this authority to restrict foreign equity, normally at about 30%, and requires foreign firms to enter into joint ventures with local partners.
Foreign companies have found difficulty to operate manufacturing facilities efficiently due to the difficulty to bring workers from abroad. Additionally, many foreign firms also face re- strictions in the number of expatriate workers they are allowed to employ.
APPENDIX A: FOREIGN EQUITY GUIDELINES
General Policy for Manufacturing Investment
-- No equity conditions are imposed on projects which export at least 80% of their output.
-- For projects exporting from 51 to 79% of output, majority foreign ownership of up to 79%) is permitted. This can be raised to 79% ownership under certain circumstances.
-- For projects that export between 20 and 50% of output, 30-51% foreign ownership is allowed.
-- For projects exporting less than 20% of output, maximum foreign ownership is 30%.
Note: From January 1, 1998 through December 31, 2000, all manufacturing companies with export conditions can apply to sell up to 50% of their total output to the local market. Applications will be assessed by MITI on the following criteria: (a) for products with zero import duty, an automatic approval will be given; (b) for products with import duty, the evaluation will be based on (I) whether the products are available locally or (ii) if the domestic supply is inadequate. The relaxation of export conditions were put forth in an attempt to encourage local sourcing.
Policy on Malaysian Equity Distribution
Where foreign equity is less than 100%, local equity will be distributed as follows:
-- For foreign projects without a local partner, if 70% or more of the equity is foreign-held, the balance is reserved for Bumiputeras. If less than 70% is foreign held, 30% is reserved for Bumiputeras, and the rest for other Malaysians. If the equity reserved for Bumiputeras is not taken up, the Ministry of Inter- national Trade and Industry (MITI) will allocate the balance to other Malaysians.
-- For foreign joint ventures with Bumiputeras, all local equity will be held by the Bumiputera partner. If he is unable to do so, MITI will allocate any unclaimed local equity to other Malaysians.
-- For foreign joint ventures with non-Bumiputeras, the local partner will take at most 30% of the equity.
Any other local equity will be held by a Bumiputera.
Policy on Equity for Non-Renewable Resources
For projects that 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 risks involved in the project;
-- The availability of Malaysian expertise in the areas of exploration, mining and processing of the minerals concerned; and
-- The degree of integration and level of value-added involved in the project.
APPENDIX B: EXPORT INCENTIVES
The principal incentives for the manufacturing sector are contained in the Promotion of Investments Act of 1986 and the Income Tax Act of 1967. These incentives apply to companies subject to Malaysia's 28% corporate income tax. Some of these incentives are also available for investments in agriculture, tourism, R&D and technical training.
Incentives for Manufacturers
-- Pioneer Status. Initial entrant(s) in designated new in- dustries can receive full or partial tax exemption for five to ten years depending on the type of products. Dividends to shareholders will also be tax exempt.
-- Investment Tax Allowance (ITA). A write-off of up to 60% of capital expenditures incurred during the first five years of project commencement against 70% of income. Any unused balance can be carried forward. Not available to firms with Pioneer Status.
-- Reinvestment Allowance. An allowance of 60% of capital ex- penditures to expand, modernize or diversify an existing facility.
-- Export Credit Refinancing (ECR). This provides qualified exporters with below-market, short-term commercial credit for pre and post-shipment.
-- Export Allowance. Five percent of the FOB value of export sales can be deducted from the pre-tax income of trading companies exporting Malaysian manufactures.
-- Double Deduction of Export Credit Insurance. This is provided if the insurance company is approved by the Ministry of Finance.
-- Double Deduction for Export Promotion. This is granted for certain qualifying expenditures (e.g. overseas advertising and export market research).
-- Infrastructure Allowance (IA). An allowance of 100% is granted for capital expenditure on infrastructure such as reconstruction, extension or improvement of any permanent structure to set off against 85% of income. This is available until October 1998.
-- Incentives for Research and Development. These include a five-year tax holiday and permission to carry tax-relief period losses forward to the taxable period.
-- Incentives for Training. These consist of an IA for buildings used for training and a double deduction for approved training expenses.
-- Customs Exemption for Raw Materials, Machinery. This is granted for export-oriented manufacturers which use raw materials or components that are not made locally of acceptable quality. It also applies to machinery directly used in production. Under certain circumstances, it may be granted for firms pro- ducing for the domestic market.
APPENDIX C: MULTIMEDIA SUPER CORRIDOR (MSC) INCENTIVES
Companies with MSC status are eligible for the following incentives:
-- Pioneer status for 10 years or 100% investment tax allowance;
-- No duty on multimedia equipment;
-- A special guideline to regulate foreign currency transactions and loans;
-- A special incentive for companies whose presence will attract others to establish their operations in the Multimedia Super Corridor;
-- Small and medium-scale firms can apply for government funding for R&D in designated areas; and
-- No restriction on recruitment of expatriates.
APPENDIX D: EXPATRIATE EMPLOYMENT
Applications for expatriate posts are submitted to MIDA at the same time as the manufacturing license application. The following are the Government guidelines on the employment and retention of expatriate personnel in Malaysia:
-- A company with a paid-up capital of at least US$2 million is automatically allowed five expatriate positions. More can be requested.
-- For a company with paid-up capital of less than US$2 million, expatriate positions may be permitted if the paid-up capital is in the neighborhood of RM500,000 (US$125,000). If allowed, ex- patriate executive posts may be retained for at most 10 years if a Malaysian citizen is being trained for the post. Non-executive expatriate posts can be retained for at most five years, again providing a Malaysian is being trained. The Malaysian Government may relax these conditions for certain high-priority industries.
-- Intra-company transfers by expatriates already holding a work permit still require approval by the authorities.
-- Work permits are valid for at most 10 years, although one-year permits are more common.
-- Work permit holders are granted multiple-entry visas valid for the same duration of the work permit.
-- Companies desiring additional expatriate posts as a result of expansion or product diversification or to renew existing posts must apply to the Standing Committee on Malaysianization of the Department of Immigration.
APPENDIX E: DEFINITION OF BUMIPUTERA-CONTROLLED PUBLICLY-LISTED COMPANY
-- At least 35% of the equity or voting power is held by an identifiable Bumiputera group, company or institution and no other non-Bumiputera group holds more than 10% of the voting power, or in aggregate the identifiable non-Bumiputera group owns no more than 24%.
-- The shareholding of the Bumiputera group is not associated directly or indirectly with any non-Bumiputera group.
-- The Bumiputera group is the rightful owner of, and capable of exercising the voting power attached to, its shareholding free of any influence.
-- At least 51% of the members of the board of directors including the chairman, who is to be nominated by the Bumiputera group, are Bumiputeras.
-- The managing director/chief executive officer is Bumiputera.
-- At least 51% of management, professional and supervisory staff is Bumiputera.
[end of document]Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title 17, United States Code.