FOREIGN DIRECT INVESTMENT (FDI) in Malaysia: SETTING UP OF MANUFACTURING BUSINESS IN MALAYSIA (PART 1)

 

FOREIGN DIRECT INVESTMENT (FDI) in Malaysia:

SETTING UP OF MANUFACTURING BUSINESS IN MALAYSIA (PART 1)

 

STATUTORY REQUIREMENT

The Malaysia’s Industrial Co-ordination Act 1975 (ICA) requires Investor to apply a manufacturing licence with the Ministry of International Trade and Industry (MITI). Application for a manufacturing licence shall be submitted to the Malaysian Industrial Development Authority (MIDA), an agency under MITI in charge of the promotion and coordination of industrial development in Malaysia.

The ICA further defines:-

(a)          “Manufacturing activity” as the making, altering, blending, ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal; and includes the assembly of parts and ship repairing but shall not include any activity normally associated with retail or wholesale trade.

(b)          “Shareholders’ Funds” as the aggregate amount of a company’s paid-up capital, reserves, balance of share premium account and balance of profit and loss appropriation account, where:

(i)       Paid-up capital shall be in respect of preference shares and ordinary shares and not including any amount in respect of bonus shares to the extent they were issued out of capital reserve created by revaluation of fixed assets;

(ii)      Reserves shall be reserves other than any capital reserve created by revaluation of fixed assets and provisions for depreciation, renewals or replacements and diminution in value of assets.

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(c)  “Full-Time Paid Employees” as all persons normally working in the establishment for at least six hours a day and at least 20 days a month for 12 months during the year and who receive a salary. It also includes directors of incorporated enterprises except those paid solely for their attendance at board of directors meetings. The definition encompasses family workers who receive regular salaries or allowances and who contribute to the Employees Provident Fund (EPF) or other superannuation funds.

 

Minimum Capital Investment Per Employee

The Guideline on approval of industrial projects under the ICA has amended on 27 January 2019 by the MIDA by introducing the following additional eligibility criteria.–

  • The minimum Capital Investment Per Employee (CIPE) for the project needs to be RM140,000.00.

 

  • Malaysians need to make up to 80% of the total full-time workforce of the company and current policies apply to foreign workers, including outsourced workers. Managerial, technical and supervisory staff must at least 25% of total employment or having an added value of the product of at least 40%. [2]

 

You are advised to seek consultation with a Malaysia Law Firm. For further enquires, kindly contact us at consult@lylu.com.my

For consultation on the issue of foreign investment in Malaysia, please proceed to send in your enquiry by clicking here.

 

[2] Approval and Licensing – MIDA | Malaysian Investment Development Authority