BUSINESS OPPORTUNITIES IN REGIONAL ESTABLISHMENTS

IN MALAYSIA

ZAINAL ABDUL RAHMAN

SENIOR DEPUTY DIRECTOR

REGIONAL ESTABLISHMENT & SUPPLY CHAIN MANAGEMENT DIVISION

MIDA, 27 MAY 2014

MAKING MALAYSIA A REGIONAL HUB

SCOPE

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GLOBAL OUTLOOK

• Global services offshoring :

2010 onwards – natural element of corporate services supply chain (A.T.Kearney 2011)

> globalisation

> technological progress

> comparative advantage

> efficient trade facilitation measures

> dynamic and evolving

• Global value of offshore services (2010)

> US$250-300 billion (UNCTAD, 2013)

2014: REGIONAL OUTLOOK AND

POTENTIAL

ASIA PACIFIC ECONOMY 45% of global trade 55% of global GDP

• APEC Agenda on Regional Connectivity : 10% improvement supply chain management by 2015

ASEAN• Average GDP of 5.5% through 2017 (OECD)• ASEAN Connectivity Framework Agreements :

Maritime, Air Freight and Transport Facilitation

• Strong and Diversified Regional Industrial Clusters

• Regional FTAs- greater global integration

APPROVAL AS AT 31 DECEMBER 2013

Regional of Establishment and Operation :

Positive growth rate

Competitive position in Asia Pacific Region

SUPPLY CHAIN SERVICES MARKET :

VS

More process and manufacturing -based activities

WHERE ARE WE NOW ?

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REGIONALESTABLISHMENT& SUPPLY CHAIN MANAGEMENT

Increasing trend of global operation hub

2012 : RM 4.411 Billion (8)

2013 : RM 7.9 Billion (9)

2013: APPROVAL TRENDS

Increasing trend of OHQ/ RDC/ IPC

approvals

2012 : RM 1.89 Billion (24)

2013 : RM 2.06 Billion (14)

Increasing trend of

ILS approvals

2012 : RM 375.1 Million (6)

2013 : RM 880.5 Million (15)

Locally –

dominated TMC approvals

2012 : -

2013 : RM 66.6 Million (4)

Strong base to ASEAN market

Well-known business services

centre

MALAYSIA AS A REGIONAL HUB

Government Reforms -Strengthened pro-

business environment

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MALAYSIA

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• Services Development Index (SDI) in the 2nd

Global Market 2012 Expansion Services Report (2012)

Ranked 8th among 18 Countries in term of overall level of services sophisphication.

• Grant Thorton Global Dynamism Index (GDI) 2013

2nd Most Dynamic Country in ASEAN 13th worldwide

Representative Office (RE) / Regional Office (RO)

• An office of foreign company/organization established in Malaysia to

perform permissible activities for its head office/principle.

• Benefit : Expatriate approval

Taxed based on the number of days in Malaysia.

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Feasibility Studies

Planning of Business Activities

Research & Development

Coordination Centre

Operational Headquarters (OHQ)

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A locally incorporated company that carries on a business in

Malaysia to provide qualifying services to its offices or related

companies in and outside Malaysia:R&D

Corporate Financial Advisory

Business Planning & Coordination

Treasury Fund Management

General Management & Administration

Procurement Services

Sales Promotion Planning

Technical support & maintenance

Operational Headquarters (OHQ)

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FACILITIES & INCENTIVES

• Tax exemption for 10 years on :

Business income

Interest

Royalties

• Expatriates are taxed based on the number of

days they are in Malaysia.

• 100% foreign equity holding.

• Approval of expatriate posts.

MAJOR APPROVED OHQ

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JORD

International Procurement Center (IPC) & Regional Distribution Center (RDC)

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Undertakes of raw materials,

components and finished products

to its group of related companies

and to unrelated companies in

Malaysia and abroad.

International Procurement Center (IPC)

• Undertakes procurement and sale of raw materials,components and finished products to its group of relatedcompanies and to unrelated companies in Malaysia andabroad.

Regional Distribution Center (RDC)

• Acts as a collection and consolidation centre for finishedgoods, components and spare parts produced by its owngroup of companies for its own brand to be distributed todealers, importers or its subsidiaries or other unrelatedcompanies within or outside the country

International Procurement Center (IPC) & Regional Distribution Center (RDC)

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FACILITIES & INCENTIVES

• Full tax exemption on its statutory income for 10 years.• Dividends paid from the exempt income are exempted

from tax in the hands of its shareholder.• 100% foreign equity holding• Approval of expatriate posts based on requirement• Custom duty exemption for raw materials, components

or finished products.• Mainly in semiconductors, medical devices and

automotive sectors.

GLOBAL Players with Approved IPC in Malaysia

GLOBAL Players with Approved RDC in Malaysia

Treasury Management Center (TMC)

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Tax incentive is given to companies that

provide centralized treasury management

services for its group of related companies within or outside Malaysia.

Treasury Management Center (TMC)

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FACILITATES & INCENTIVES

• 70% Exemption On Statutory Income For 5

Year On Income :

Financial services

Investment services

Financial Risk Management

• Current status :

Locally dominated company

Integrated Logistics Services (ILS) & International Integrated Logistics Services (IILS)

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Integrated Logistics Services (ILS)

• A locally incorporated services provider that undertakes integrated logistics services (i.e. freight forwarding, warehousing & transportation.)

International Integrated Logistics Services (IILS)

• A locally incorporated company that provides integrated and seamless logistics services (door-to-door) along the logistics supply chain as a single entity on a regional or global scale.

Integrated Logistics Services (ILS)

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INCENTIVES• Pioneer status or Investment tax allowance

CURRENT STATUS :• Locally dominated company• Moving-up to regional level• E-commerce & E- Fulfillment

GLOBAL HUB OPERATION

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• Changing of global business model.• Off-shore trading.• MNCs mainly from USA and Europe.

OVERSEAS SPM

- RE/RO Database

- Outreach/ engagement

- Locally-based MNC

INVESTMENT PROMOTION APPROACH: 2014

POLICY- RELATEDINITIATIVE

• Budget 2014 :

Master Plan on Logistics

& Trade Facilitation.

• Regional Establishment

Incentives

WORK PROGRAMME 2014

SINGAPORE

USA

MALAYSIA

Domestic Seminar Collaboration Business Meeting

INDONESIA

2012

2013

2014

RM2.0

billion

RM8.0 billion

RM2.5billionRegional

Operations

No. of

Companies

Target

Amount of

Investment

(RM

billion)

RE/RO 150 0.09

OHQ 8 0.75

TMC 5 0.1

IPC 5 0.6

RDC 5 0.2

ILS/IILS 10 0.4

GLOBAL

OPERATIONS

HUB

10 6

GRAND

TOTAL

193 8.0

2014: TARGET

2014

RM 12.2 billion

Investment Approved in 2013

Thank You

TOTAL INVESTMENT

Total Investment (RM bil.)

2008 2013

Operational Headquarters (OHQ) 0.08 0.567

International Procurement Centre (IPC) 0.04 1.26

Regional Distribution Centre (RDC) 0.01 0.228

Representative Office (RE) 0.05 0.152

Regional Office (RO) 0.04 1.955

Integrated Logistics Services (ILS) 0.14 0.33

Treasury Management Centre (TMC) - 0.066

Global Operational Hub 7.94

TOTAL 0.36 12.2

RM 0.36 B RM 12.2 B

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SURVEY ON TOP 500 GLOBAL MNCs • 215 (43%) global OHQ are located in Asia Pacific

Out of which:

46% in Singapore

25% in Hong Kong

11% in China

8% in Malaysia

4% in Thailand

Source : CNN Money Global 500 Press Survey (PWC Analysis 2011)

ASIA PACIFIC: TOP MNCs CHOICE OF OHQ LOCATION

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