INVESTING IN ISKANDAR - Iskandar Malaysia

investing in
iskandar

Iskandar Development Region
a strong & sustainable metropolis of international standing
Johore
Malaysia
singapore
indonesia
Malaysia is one of the fastest-growing economies in the region. A country that offers
much promise as an exciting emerging market with high growth potential.
The Ninth Malaysia Plan (9MP), Malaysia’s economic map for the years 2006 to 2010,
incorporates vital provisions and initiatives for further economic development. Of these,
one initiative set to spearhead the growth of the Malaysian economy is the Iskandar
Development Region (Iskandar).
The first of its kind, Iskandar is set within southern Peninsular Malaysia’s most developed
region of international standard - a bustling, vibrant metropolis that centres on quality
living, business and entertainment - amidst a pristine environment.
Iskandar, which has been allocated RM4.3 billion by the Government, encompasses a vast
acreage of land, making it the largest single development project ever to be undertaken
in the region.
Its strategic location, beside Singapore and between the booming economies of China
and India, accessibility to leading Asian cities; excellent air, road, sea and rail connectivity,
proximity to some of the world’s most rapidly growing and important economies; and
range of attractive fiscal and non-fiscal incentives present Iskandar as an outstanding
investment opportunity.
Iskandar is poised to attract an exciting influx of foreign and high-level corporate
investments as discerning investors look to cash in on its many advantages and high
growth potential. Now’s the right time. As a serious investor, take the first step to discover
Iskandar’s exciting investment climate, and how it can positively impact your returns.
pg.
investing in
iskandar

quick facts
Chapter 1: Introduction
1.1 Malaysia as an Ideal Investment Destination
1.2 Background of Iskandar
1.2.1 International Positioning of Iskandar
1.2.2 Iskandar’s Positioning
1.2.2.1 Global
1.2.2.2 Regional
1.2.2.3 Geographical Coverage
1.2.3 Four Essential Components of Iskandar
1.3 The Comprehensive Development Plan (CDP)
1.3.1 Strategic thrust of the CDP
1.4 Present and Future Structure of the Iskandar Economy
1.5 The Iskandar Regional Development Authority (IRDA)
1.5.1 One Stop Centre
1.6 South Johor Investment Corporation (SJIC)
Chapter 2: Legal System
2.1 Foundation of the Legal System
2.2 System of Government in Malaysia
2.3 Distribution of Powers between the Federal, State and Local
Governments
2.4 Independence of the Judiciary
2.5 Malaysian Court System
2.5.1 Superior Courts
2.5.2 Subordinate Courts
Chapter 3: Business Environment
3.1 A Snapshot of the Current Economic Situation and Projected Economic
Growth
3.2 The Ninth Malaysia Plan (9MP) and Third Industrial Master Plan (IMP3)
3.2.1 The Ninth Malaysia Plan (9MP)
3.2.2 The Third Industrial Master Plan (IMP3)
3.3 Inflation Rate
3.4 Interest Rate
3.5 Knowledge Workers
Chapter 4: Foreign Investment
4.1 Foreign Investment Committee (FIC)
4.1.1 Broad Equity Policy
4.1.2 Acquisition of Real Estate/Property by Foreign Parties
Chapter 5: Banking System
5.1 Financial Institutions
5.2 Malaysia as an International Islamic Financial Centre
5.3 International Offshore Financial Centre
5.4 Capital Market
5.4.1 Equity Instruments
5.4.2 Debt Securities
5.4.3 Derivatives
5.4.4 Islamic Instruments
6
15
16
16
16
16
16
18
18
18
19
20
21
22
22
25
25
25
26
26
26
26
29
32
32
34
35
35
37
41
41
42
45
45
46
47
47
47
48
48
investing in
iskandar

table of
contents
Chapter 6: Exchange Controls
6.1 Exchange Control
6.1.1 External Accounts
6.1.2 Foreign Currency Accounts
6.1.3 Repatriation of Profits to Foreign Shareholders
6.1.3.1 Distribution of Dividends
6.1.3.2 Payment of Fees
6.1.3.3 Voluntary Liquidation/Capital Reduction
6.1.4 Foreign Credit Facilities
6.1.5 Provision of Credit Facilities to Non-Residents
6.1.5.1 Foreign Currency Credit Facilities
6.1.5.2 Ringgit Credit Facilities
6.1.6 IOFC Entities
6.2 Foreign Exchange Administration Policy for Iskandar
Chapter 7: Structure of Business Entities
7.1 Companies Incorporated in Malaysia
7.1.1 Forms of Companies
7.1.1.1 Companies Limited by Shares
7.1.1.2 Companies Limited by Guarantee
7.1.1.3 Companies Limited by both Shares and Guarantee
7.1.1.4 Unlimited Companies
7.1.2 Incorporation of a Company
7.1.2.1 Registration of a New Company
7.1.2.2 Purchase of a ‘Shelf Company’
7.1.2.3 Who can Incorporate a Company?
7.1.3 Shareholders
7.1.3.1 Conditions and Characteristics
7.1.3.2 Number of Shareholders
7.2 Branches of Foreign Companies
7.3 Joint Ventures
7.4 Sole Proprietorship
7.5 Partnership
7.6 Representative Office/Regional Office
Chapter 8: Financing Reporting and Audit Requirements
8.1 Accounting Standards
8.2 Audit Requirements
8.3 Record Keeping
Chapter 9: Intellectual Property
9.1 Patents
9.2 Copyright
9.3 Trademarks
9.4 Industrial Designs
9.5 Layout Designs of Integrated Circuits
Chapter 10: Taxation
10.1 Tax Administration
10.1.1 Self-assessment System
10.1.2 Payment of Tax
10.1.2.1 Companies
10.1.2.2 Individuals
10.1.2.2.1 Employment
10.1.2.2.2 Self-employment/Sole Proprietors
10.1.3 Public Rulings
51
51
51
52
52
52
52
53
53
53
53
54
54
57
57
57
57
58
58
58
58
58
58
59
59
59
59
60
60
60
60
63
63
64
67
67
68
68
68
71
71
71
71
71
72
72
72
investing in
iskandar

10.2 Direct Taxes
10.2.1 Companies
10.2.1.1 Scope of Taxation
10.2.1.2 Corporate Tax Residence
10.2.1.3 Rate of Tax
10.2.1.4 Tax Computation
10.2.1.4.1 Source Basis
10.2.1.4.2 Deductible Expenditure
10.2.1.4.3 Capital Allowances
10.2.1.4.4 Tax Losses
10.2.1.4.5 Tax Incentives
10.2.1.4.6 Transfer Pricing
10.2.2 Individuals
10.2.2.1 Scope of Taxation
10.2.2.2 Residence
10.2.2.3 Tax Rates
10.2.2.4 Personal Reliefs
10.2.3 Withholding Tax
10.3 Capital Taxes and Transfer Taxes
10.4 Indirect Taxes
10.4.1 Value Added Tax (VAT)/Goods and Services Tax (GST)
10.4.2 Sales Tax
10.4.3 Service Tax
10.4.4 Customs Duty
10.4.5 Excise Duty
Chapter 11: Immigration and Employment Matters
11.1 Immigration Requirements
11.1.1 Visas
11.1.2 Employment Passes
11.1.3 Policy Regarding Employment of Expatriate Personnel
11.1.4 Application for Expatriate Posts
11.1.5 Employment of Foreign Workers
11.1.6 Special Categories of Employment Passes
11.2 Legal Requirements under the Employment Act 1955
11.3 Employees Provident Fund (EPF)
11.4 Social Security Organisation (SOCSO)
Chapter 12: Incentive and Support Package
12.1 Approved Node
12.1.1 Location Map - Node 1
12.2 Tax Incentives Available to Companies in Iskandar
12.3 Non-fiscal Incentives for Iskandar
12.4 Qualifying Activities
12.5 Application Process
Chapter 13: Frequently Asked Questions (FAQs)
useful information/addresses/
sources of information/glossary & definition
72
72
72
72
72
73
73
73
74
75
76
76
76
76
77
77
78
78
79
79
79
79
80
81
82
85
85
86
87
87
87
88
90
90
90
93
93
93
94
95
96
99
105
investing in
iskandar

Introduction
Legal System
Business Environment
Foreign Investment
Banking System
Exchange Controls
Structure of Business Entities
Financing Reporting and Audit Requirements
Intellectual Property
Taxation
Immigration and Employment Matters
Incentive and Support Package
Frequently Asked Questions (FAQs)
Useful Information/Addresses/Sources of Information/Glossary & Definition

Malaysia
Malaysia is strategically located in the Asia Pacific Region along the
Straits of Malacca and South China Sea, bordering Thailand, Singapore
and Indonesia.
Population 27.17 million 1
Age Structure 14 years and below: 32.2%
15 – 64 years: 63.4%
64 years and above: 4.4%
People
Religion
Language
Capital
Administrative
Divisions
Currency
Malays make up about 57% of the population whilst the rest of the
population is made up of other ethnic groups comprising Chinese,
Indians and others 2
Islam is the official religion but all other religions are freely practised,
particularly Christianity, Buddhism and Hinduism 2
Bahasa Malaysia (Malay language) is the national language but English is
widely spoken. The ethnic groups also speak various languages such as
Mandarin and Tamil and dialects such as Cantonese, Hokkien and many
others
Kuala Lumpur
13 states (Johore, Kedah, Kelantan, Melaka, Negeri Sembilan, Pahang,
Perak, Perlis, Pulau Pinang, Sabah, Sarawak, Selangor & Terengganu);
Federal Territory of Kuala Lumpur, Labuan, and Putrajaya
The unit of currency is Malaysian Ringgit indicated as RM. Foreign
currency can be converted at banks and money changers
GDP (Current Prices) RM573 billion [2006] 1 , RM298 billion [1 st & 2 nd Qtr 2007] 1
pg.
investing in
iskandar

nepal
china
bangladesh
quick facts
india
myanmar
laos
hong kong
thailand
vietnam
cambodia
philippines
sri lanka
brunei
malaysia
Indonesia
singapore
GDP (Constant 2000 Prices) RM474 billion [2006] 1 , RM244 billion [1 st & 2 nd Qtr 2007] 1
GDP Growth Rate 5.9% [2006] 1 , 5.7% [2 nd Qtr 2007] 1
(Constant 2000 Prices)
Per Capita GNI RM20,841 [2006] 1 , RM20,898 [1 st Qtr 2007] 1
CPI 3.9% [2006] 3 , 2% [Jan – Jul 2007] 1
Total Exports RM589 billion [2006] 1 , RM283 billion [Jan – Jun 2007] 1
Total Imports RM481 billion [2006] 1 , RM239 billion [Jan – Jun 2007] 1
Labour Force 10.63 million [2006] 1 , 10.83 million [1 st Qtr 2007] 1
Unemployment Rate 3.3% [2006] 1 , 3.4% [1 st Qtr 2007] 1
Public Holidays
Public holidays are given to major festive/religious occasions
such as Hari Raya Puasa (Eid), Chinese New Year, Deepavali,
Wesak Day and Christmas. Other public holidays include
New Year’s Day (January 1), Labour Day (May 1), King’s
Birthday (1 st Saturday in June) and National Day (August 31)
Sources:
1 www.statistics.gov.my
(as at 4 September 2007)
2 www.idr.com.my
3 ‘Economic Report 2006/2007’
published by the
Ministry of Finance, Malaysia
pg.
investing in
iskandar

Johore
Johore has a plentiful supply of affordable industrial land
and factory premises, commercial floor space, skilled workers and
supporting services.
Capital
Johore Bahru
Population 3.17 million (in 2005) 1
Total Area 19,984 sq km 1
Strategic Location
Johore Districts
Johore is located at the southernmost state of Peninsular
Malaysia and neighbouring Singapore
Johore Bahru, Segamat, Pontian, Kluang, Batu Pahat, Mersing,
Muar and Kota Tinggi 2
Business-Friendly The State Government has set up various facilities to support
and Efficient Public and assist investors such as the Johor State Investment
Services Centre (JSIC), Industrial Development Committee,
Industrial Park Management Committee, Johor Skills
and Knowledge Management Centre and Johor Skills
Development Centre 4
Cost-Effectiveness
Major Economic
Activities
A Matured Economic
Base and Success Story
Johore has a plentiful supply of affordable industrial land
and factory premises, commercial floor space, skilled
workers and supporting services. The cost of doing
business in Johore is relatively low in comparison with
some neighbouring countries 4
Resource-based industries:
• Palm oil and rubber-based products, herbal products,
wood products and biotechnology 3
Non-resource based industries:
• Electrical & electronic products, marine & port-related
industries and services, petrochemical products and
engineering (M&E) 4
Johore’s economic structure has developed considerable
depth with supporting and complementary industries
existing side by side with a large pool of skilled workforce
and strong financial and other institutional support services.
This has spurred many leading multinational corporations to
set up base and grow in Johore. The State of Johore has an
impressive track record of successful businesses 4
pg.
investing in
iskandar

quick facts
perlis
kedah
labuan
penang
perak kelantan
terengganu
sabah
selangor
wilayah
persekutuan
negeri sembilan
melaka
pahang
Johore
sarawak
Excellent Living Johore has excellent housing facilities in secured
Environment And environments with beautiful landscaping. Nature-lovers and
High Quality Of Life adventure-seekers can enjoy the numerous and varied rest
and recreational facilities on both land and sea.
Major attractions are Mount Ledang, beautiful beaches
such as Desaru, Stulang Laut and Teluk Ramunia as well
as several islands off Johore such as Rawa Island, Besar
Island and Sibu Island. In addition, the rare and unique
RAMSAR wetlands (situated in Pulau Kukup, Sungai Pulai
and Tanjung Piai) and surrounding mangrove areas within
Iskandar provide great opportunities for tourism activities.
The cost of living is also comparatively low in comparison
with some neighbouring countries 4 .
Sources:
1 Comprehensive Development
Plan for Iskandar
2 www.johordt.gov.my
3 www.idr.com.my
4 www.sjic.com.my
pg.
investing in
iskandar

Iskandar Development Region
Iskandar Development Region is set within Southern PeninsulaR
Malaysia’s most developed region, where living, entertainment,
environment and business seamlessly converge within a bustling
and vibrant metropolis.
Land Size
Population
GDP
Iskandar covers a land size of 2,217 sq km (221,634 hectares)
Iskandar is estimated to contain 1.35 million people (or 43% of Johore’s
population of 3.17 million in 2005) with a workforce of approximately
66% of the population
• Total Iskandar GDP is about USD20 billion in 2005 (about 60% of
Johore’s total GDP of USD33.4 billion)
• In 2005, the per capita GDP for Iskandar is about USD14,790 which
is higher than Johore’s per capita GDP of USD10,757
• Services and manufacturing sectors are 2 main pillars of Iskandar’s
economy (dominated by the services sector which contributes
about USD10 billion in Iskandar)
• Within the services sector, Wholesale and Retail Trade contributes
(42.2%), Tourism and Hospitality (16.8%), Professional and Business
(14.6%), Transport and Related (12.7%), Medical and Educational
(6.7%), Educational (6.7%), and Financial (6.6%)
pg. 10
investing in
iskandar

Johore
quick facts
senai-skudai
iskandar
nusajaya
Johore Bahru
city centre
eastern gate
development
western gate
development
node 1
singapore
vision of iskandar • Iskandar accounts for 60% of the State of Johore’s GDP with
the services sector being the largest source of growth
• Accessibility to a large, educated workforce that is skilled and
proficient in English, Bahasa Malaysia and other international
languages such as Mandarin
• A mixture of green-fields and brown-fields and lower cost of
living as compared with Singapore and Hong Kong
• State-of-the-art telecommunication infrastructure
• Efficient and transparent public institutional framework
• World-class land, sea and air cargo facilities that allow good
supply and distribution of raw materials
• Modern airport in Senai, handling 1.25 million visitors and over
7,500 tonnes of cargo in 2005
• Port of Tanjung Pelepas and Pasir Gudang Port – established
world-class transshipment ports of Malaysia
• Significant advancement in the knowledge-based clusters such
as information technology, biotechnology, tourism, education
& healthcare, Islamic finance, manufacturing and electrical and
electronic industries
• Excellent international tourist destinations and sports facilities,
including shopping and healthcare & wellness
• Low inflation rate (less than 3.5%)
The above advantages will facilitate the sustainable development
concept of a complete lifestyle with a balanced mixture of Eastern
culture, heritage and style of architecture, coupled with the latest
technology, world-class logistics and security systems.
pg. 11
Sources: www.idr.com.my
investing in
iskandar

johorE
malaysia

1
Chapter 1
Introduction
1.1 Malaysia as an ideal investment destination
1.2 Background of Iskandar
1.2.1 International Positioning of Iskandar
1.2.2 Iskandar’s Positioning
1.2.2.1 Global
1.2.2.2 Regional
1.2.2.3 Geographical Coverage
1.2.3 Four Essential Components of Iskandar
1.3 The Comprehensive Development Plan (CDP)
1.3.1 Strategic thrust of the CDP
1.4 Present and future structure of the Iskandar economy
1.5 The Iskandar Regional Development Authority (IRDA)
1.5.1 One Stop Centre
1.6 South Johor Investment Corporation (SJIC)
investing in
iskandar

Beijing
china
nepal
Kathmandu
india
bangladesh
Dhaka
myanmar
Chittagong
laos
Hanoi
Hong Kong
Vientiane
Yangoon
thailand
Bangkok
cambodia
vietnam
Phnom Penh
philippines
sri lanka
Colombo
Kuala Lumpur
malaysia
Bandar Seri
Begawan (Brunei)
indonesia
Johore
singapore
4-6 hr
Flight Radius
2-4 hr
Flight Radius
2 hr
Flight Radius
Jakarta
malaysia has emerged as a dynamic market with high growth potential

introduction
Chapter 1
Introduction
1.1
Malaysia as an ideal investment destination
Malaysia is strategically located in the Asia Pacific Region along
the Straits of Malacca and South China Sea, bordering Thailand,
Singapore and Indonesia. The country is geographically divided
between West Malaysia (often referred to as Peninsular Malaysia)
and East Malaysia.
West Malaysia’s neighbouring countries are Thailand (to the North), Singapore (to the
South) and the Indonesian islands of Java and Sumatra (to the West). East Malaysia, which
occupies approximately 1/3 of the island of Borneo, comprises two Malaysian States,
namely, Sabah and Sarawak.
Malaysia gained independence in 1957, and has grown from strength to strength since
then. In the early years post-independence, the prime source of revenue to the country
came from natural resources, such as tin ore, rubber and agricultural produce. Malaysia’s
geographical location in the Asian region, together with its strong infrastructure including
its ports and airports, were instrumental in facilitating its growth.
During the 1980s, the industrial sector grew significantly, driving the economy forward
and achieving strong growth rates. During this period, there was a significant rise in
foreign direct investment (FDI) with many foreign industrial players being attracted to
Malaysia’s strong workforce and infrastructure. The Government also invested heavily
in infrastructure development during this time with the building of highways across
the country and upgrading of transport and other public facilities, which in turn fuelled
further growth.
Despite a dip in FDI during the Asian financial crisis in 1997-1998, the country continues to
attract investment from abroad and has also generated significant private sector investment
locally in recent years. While the manufacturing and agricultural sectors continue to be
strong economic contributors, the services sector is emerging as a growth area as the
country continues its journey to becoming a fully developed nation.
The Malaysian Government has offered investors a host of fiscal incentives over the years,
including full tax exemptions for up to 10 years and partial tax exemptions up to 70% of
statutory income (i.e. tax adjusted income after taking into account capital allowances, the
equivalent of tax depreciation). Additionally, there have been many incentives in the indirect
tax regime, such as the designation of free zones and bonded warehouse facilities.
Aside from tax incentives, Malaysia is a prime location for foreign investment due to its sound
legal system (which is largely based on the British legal system), excellent infrastructure,
availability of a large, skilled workforce and stable political and economic environment.
To secure Malaysia’s position as a strong economy in the region, the Government has
taken the bold initiative to designate a unique investment area, known as the Iskandar
Development Region (Iskandar), which will provide a range of fiscal and other incentives
to spearhead the growth of the Malaysian economy and attract FDI. The Iskandar concept
is the first of its kind in Malaysia and is designed to take the economy to new heights.
pg. 15
investing in
iskandar

pg. 16
investing in
iskandar
1.2
Background of Iskandar
1.2.1 International Positioning of Iskandar
Located in the State of Johore, Iskandar:
• lies at the heart of the Southeast Asia at the southern tip of Peninsular Malaysia
within minutes from Singapore
• is strategically located at the crossroads of East-West trade lanes
• lies mid-way between the booming economies of China and India
• is only a 4 to 8 hour flight from leading as well as fast-growing Asian cities
such as Bangalore, Bahrain, Delhi, Dubai, Hong Kong, Hanoi, Ho Chi Minh,
Shanghai and Taipei. It is also within reach of a global market of some 800
million people
Iskandar is readily accessible by air with an international airport in Johore and a
mere hour’s drive away from Singapore Changi Airport. By road, Kuala Lumpur,
Malaysia’s capital city, is an approximately 4-hour drive away on excellent highways.
Access is also available via rail using Malaysia’s comprehensive railway network
and by sea, as Iskandar is flanked by 3 major ports – Pasir Gudang Port, Port of
Tanjung Pelepas and Tanjung Langsat Port.
1.2.2 Iskandar’s Positioning
Iskandar is set to become southern Peninsular Malaysia’s most developed region,
where living, entertainment, environment and business seamlessly converge within
a bustling and vibrant metropolis.
1.2.2.1 Global
From a global perspective, the development of Iskandar must be viewed in
the context of the challenges presented by trade and service liberalisation
which has had a tremendous impact on the movement of capital and skilled
workforce, development of ICT and flow of information.
The development of Iskandar responds to these challenges with the
realisation that economic prosperity in modern times depends on being
globally competitive. Hence, Iskandar is positioned as an ‘international city’ to
reduce trade barriers and increase human mobility and international financing,
which greatly influence the activities of giant international corporations.
The incentive packages offered to investors and players in Iskandar have
been formulated with consideration to these challenges as far as possible.
1.2.2.2 Regional
From a regional perspective, the development of Iskandar will lend a greater
competitive edge to the region and will benefit significantly from the air
and sea linkages within Asia-Pacific countries and Malaysia’s membership
in the Indonesia-Malaysia-Singapore Growth Triangle (IMS-GT).
With market forces leading the way in the IMS-GT strategies, the private
sector acts as a driving force; and governments as the facilitators.
Concentrating on economic relations between Johore and Singapore and
between Singapore and Riau, especially Batam Island (Indonesia), the IMS-
GT offers great advantages to Johore as it is situated next to Singapore.
Singapore’s current population of 4.2 million will become the extended
Iskandar population threshold.
Indonesia, especially Batam Island, is quickly becoming Southeast
Asia’s fastest-growing offshore manufacturing centre thanks to its 750
multinational manufacturing companies that are represented in 20 industrial
estates. These companies employ nearly 200,000 Indonesians, and more
than 3,200 foreign workers from around the globe. With two direct road
links to Singapore and sea links to Batam Island, Iskandar is in an excellent
position to take advantage of the IMS-GT, which allows for international
cooperation, human mobility and tourism.

introduction
nepal
india
bangladesh
laos
myanmar
thailand
Hong Kong
vietnam
cambodia
philippines
sri lanka
malaysia
singapore
indonesia
kuala lumpur
Johore
singapore
pg. 17
investing in
iskandar

1.2.2.3 Geographical Coverage
Kulai municipal
council
kota tinggi
district council
pontian
District
council
Johore
bahru tengah
municipal
Johore
Bahru City
mukim
jeram
batu
council Council
pasir
gudang
Local
Authorities
mukim
sg. karang
mukim
serkat
singapore
690 sq.km.
Geographical
Facts
• Area – 2,217 sq
km @ 547,821
acres
• More than 3
times the size of
Singapore
• 2 times the size of
Hong Kong
Area of Coverage
• District of Johore
Bahru
• Part of the District of
Pontian
– Mukim of Jeram
Batu
– Mukim of Sg. Karang
– Mukim of Serkat
– Pulau Kukup (Mukim
Ayer Masin)
Local Authorities
• Johore Bahru City
Council
• Johore Bahru Tengah
Municipal Council
• Kulai Municipal
Council
• Pasir Gudang Local
Authorities
• Pontian District
Council
1.2.3 Four Essential Components of Iskandar
The development of Iskandar is based on four essential components as follows:
i Formulation of a Master Business Plan, i.e. the Comprehensive Development
Plan (CDP)
ii Establishment of a strong regulatory authority, i.e. the Iskandar Regional
Development Authority (IRDA) which will plan and facilitate approvals through
a one-stop centre and address social development
iii Establishment of a Super Developer, i.e. the South Johor Investment Corporation
(SJIC) which will spearhead catalyst developments in Iskandar
iv Packaged incentives to promote catalyst initiatives
1.3
The Comprehensive Development
Plan (CDP)
The CDP was specifically formulated for
the development of Iskandar. The CDP
addresses socio-economic development
in a holistic and sustainable fashion, with
particular emphasis being placed on
creating a healthy investment climate that is
attractive to local and foreign investors.
pg. 18
investing in
iskandar

introduction
The CDP also incorporates effective delivery systems required in translating the plan into
reality. In particular, the CDP incorporates the emphasis given under the Ninth Malaysia
Plan (9MP) (refer to Chapter 3), where special provisions were made and RM4.3 billion
was allocated for Iskandar alone. Iskandar encompasses 2,217 sq km of land, making it
the largest single development project ever to be undertaken in the region. Aside from
the excellent air, road, sea and rail links available to Iskandar, its strategic location and
proximity to some of the world’s most rapidly growing and important economies are key
differentiating factors for the development.
1.3.1 Strategic Thrust of The CDP
Under the CDP, Iskandar’s strategic framework consists of the following:
• Vision – ‘Development of a Strong and Sustainable Metropolis of
International Standing’
• The development of Iskandar will be guided by 5 strategic pillars
anchored by 3 key foundations
A strong and sustainable
metropolis of international standing
strategic
pillars
International
Rim
Positioning
Creation of
Catalyst
Projects
Establishment
of Hard & Soft
Infrastructure
Enablers
IRDA as a
Strong
Regulatory
Authority
Balanced
Socio-
Economic
Equity
Key
Foundations
Equitable and Fair Distribution among Stakeholders
Growth and Value Creation
Nation Building
The development of Iskandar focuses on the balancing of human and physical
aspects of development while promoting sustainable development by being mindful
of the environment. Basically, the CDP:
• supports the existing development planning system
• serves as a guide for future economic, social, environmental and physical
development
• contains policies and strategies for implementation
• plans for growth and sustainable development
The areas of focus mentioned above also seek to ensure that improvement to the
quality of community life would not compromise local environment and ecology. For
this reason, the CDP has placed great emphasis on incorporating plans to ensure
the preservation of South Johore’s natural environment specifically the unique
wetlands which are rich in mangroves and inter-tidal mudflats.
There continues to be a clear commitment to preserving these environmental assets
since Iskandar was first conceptualised. The advice of environmental experts has
been sought continuously in implementing the CDP.
pg. 19
investing in
iskandar

Certain catalyst initiatives have been identified in support of the CDP which,
amongst others, include the following:
• Waterfront development
• International destination resort
• International mixed commercial and residential development
• Leisure and tourism development
• Education and healthcare-based developments
Further information on the CDP can be found at www.idr.com.my
1.4
Present and future structure of the Iskandar economy
One of the primary objectives of Iskandar is to attract FDI in areas that will enhance
Malaysia’s competitiveness, particularly in the services sector where Malaysia is able to
excel in. This is crucial since it is recognised that regional competition in the manufacturing
sector will be difficult to surpass given the lower level of employment costs in many of the
newly emerging economies.
In view of this, 4 new Pillars from the services sector have been identified to support and
reinforce the existing 5 Pillars of the local economy.
vision
Iskandar Economy
‘Strong, diversified, dynamic and global’
the main pillars
(Drivers)
Electrical and Electronics
Petrochemicals and
Oleochemicals
Food and Agro Processing
support
system
Logistics and Related
Services
Tourism
Health Services
Educational Services
Financial Services
Creative Industries
Five Existing Pillars shall be reinforced
Four New Pillars to be added
Strong Supporting Industries
(Metal Products, Engineering, Non-metallic and Manufacturing-Related Services)
Strong Supporting Institutions
(Education, R&D, Government, Private and Social Institutions, Communication
and Coordination Systems)
World-class Professionals and Technical Workforce
basic
foundation
Excellent Physical and Infrastructure, including IT
Excellent Working and Living Environment
Stable Political and Social Environment
pg. 20
The well-established sectors which are manufacturing-based will be reinforced
while giving new emphasis on new sectors which are services-based
investing in
iskandar

introduction
Accordingly, 6 services-based Pillars have been identified and established in the CDP
outlined below:
• Creative • Healthcare
• Educational • Logistics
• Financial advisory and consulting • Tourism
The services above are crucial to Malaysia’s development as a services hub to service the
region supported by state-of-the-art facilities and infrastructure. Indeed, Malaysia is:
• transforming into an educational hub in the region with the emergence of an increasing
number of private schools, international schools, private colleges and universities
offering a wide range of educational opportunities
• an attractive healthcare haven with many overseas patients seeking medical services
in Malaysia
• a fast growing health-tourism spot
From the social perspective, one of the key aspects of the CDP is to create a living
environment that provides a high quality lifestyle for Iskandar residents.
This would be achieved through the provision of attractive living accommodation facilities,
entertainment and recreation facilities within a ‘green environment’ as well as excellent
education and healthcare facilities. In line with this, the development in Iskandar will
include a new administrative centre in Nusajaya, a Waterfront City, Medical Hub, Educity
and an exclusive holiday resort.
To ensure that the vision and mission of Iskandar are met, IRDA has been established
to oversee the development and activities of Iskandar and facilitate investors in a
timely manner.
1.5
The Iskandar Regional Development Authority (IRDA)
IRDA is a Federal statutory body established under the Iskandar Regional Development
Authority Act 2007 which came into force on 17 February 2007. It is responsible for
realising the vision and objectives of Iskandar in becoming a metropolis of international
standing. Both the Prime Minister and Chief Minister (or Menteri Besar) of Johore act as
Co-Chairmen of IRDA. This will facilitate a close cooperation between the Federal and
State Governments to ensure the smooth and effective implementation of all initiatives
in Iskandar. IRDA provides a facilitative environment for investors by responding to their
needs in a timely and transparent manner.
IRDA’s key functions are:
• Planning
– Establish national policies, direction and strategies for Iskandar
– Formulate and implement the CDP
– Integrate planning policies and strategies of the Federal Government, State
Government of Johore and local authorities relevant to Iskandar
– Identify and recommend new policies, laws and actions to enhance the
competitiveness of Iskandar
• Promotion
– Promote and stimulate Iskandar as a trade, investment and logistics centre, dutyfree
area and tourist destination
– Promote private sector investment in targeted sectors
– Facilitate and undertake economic, physical and social development in Iskandar
• Processing
– Act as principal coordinating agent on behalf of relevant Government agencies in
relation to receiving, processing and expediting the requisite approvals
– Render administrative services and assistance to facilitate requisite approvals in
connection with matters within Iskandar
pg. 21
investing in
iskandar

1.5.1 One Stop Centre
IRDA will establish a One Stop Centre (OSC) as a point-of-call for investors in
Iskandar to obtain approvals for various aspects of developments – such as
planning and land matters, licenses and permits, immigration, business set-up
and incentives.
The OSC, which acts as a principal coordinating and facilitation agent on behalf of
the Government, will offer a multi-channel government-investor interface through
the employment of simplified processes and work procedures. The scope of the
OSC will be confined to dealings with ‘IRDA clients’ (i.e. investors undertaking major
and strategic developments and investments in Iskandar, including those which are
catalytic and have a high positive impact to Iskandar and the nation). In this respect,
non-IRDA clients are expected to use the existing channels in their dealings with
the respective government agencies for various applications for approvals.
An Approvals and Implementation Committee (AIC) has been established to enable
IRDA to adopt an investor-friendly mindset and efficient work processes. This
committee serves to identify, monitor and coordinate the roles and activities of
relevant government entities – in order to expedite the processing, approval and the
implementation of major or strategic developments and investments in Iskandar.
For enquiries, please e-mail to: enquiries@irda.com.my.
1.6
South Johor Investment Corporation Berhad (SJIC)
SJIC is the investment-holding company mandated to drive the commercial developments
in Iskandar. SJIC promotes, coordinates and invests in strategic and catalytic initiatives
through shareholding stakes in joint ventures or contribution of land either through sale or
lease or granting of a concession or development rights. The mission of SJIC is to promote
and coordinate the overall development and international positioning of Iskandar.
The stakeholders of SJIC are Khazanah Nasional Berhad, Employees Provident Fund and
Kumpulan Prasarana Rakyat Johor Berhad (KPRJ). KPRJ is a company wholly-owned by
the Johore State Government. SJIC is set up with total assets of approximately RM3.4
billion in land banks and cash. As an investment-holding company, SJIC is a commercial
entity with long-term profit objectives. SJIC will develop public-private partnerships to
accelerate and enhance the growth of Iskandar.
SJIC is tasked to facilitate the implementation of Government-funded projects under the
9MP (2006 - 2010).
For more information and enquiries on SJIC please visit http://www.sjic.com.my.
pg. 22
investing in
iskandar

2
Chapter 2
Legal System
2.1 Foundation of the Legal System
2.2 System of Government in Malaysia
2.3 Distribution of Powers between the Federal, State and
Local Governments
2.4 Independence of the Judiciary
2.5 Malaysian Court System
2.5.1 Superior Courts
2.5.2 Subordinate Courts
investing in
iskandar

The malaysian legal system operates on the basis of parliament enacting legislation,
an independent judiciary and a court system similar to other commonwealth countries

legal
system
Chapter 2
Legal System
Overview of the Legal System in Malaysia
2.1
2.2
2.3
Foundation of the Legal System
The foundation of the Malaysian legal system is based on a set of written and unwritten
laws. The Federal Constitution – together with the constitutions of the States, legislation
enacted by Parliament (Acts of Parliament) and delegated legislation made by statutory
bodies under powers conferred on them by Acts of Parliament – form the integral part of
the written laws.
The unwritten laws are based on the principles of English common law, case law and local
customary law. Islamic law is another important source of law which applies only to the
Muslim population and is governed by a separate system of courts (Syariah Courts).
The Malaysian system retains many of the English system’s characteristics, but has become
increasingly influenced by the laws of other Asian jurisdictions. For example, conveyance
practice has moved towards an Australian registration system while Malaysia’s Contracts
Act is modelled after the Indian system.
System of Government in Malaysia
Malaysia is a constitutional monarchy, headed by the King, who is customarily referred
to as the Yang di-Pertuan Agong. The Yang di-Pertuan Agong is elected for a 5-year term
from among the 9 Sultans of the states in Peninsular Malaysia. The Yang di-Pertuan Agong
is also the leader of the Islamic faith in Malaysia.
Malaysia practices parliamentary democracy and has a 3-tier Government structure:
Federal, State and Local. A General Election is held every 5 years. Federal executive power
is vested in the Cabinet, led by the Prime Minister.
The Federal Constitution of Malaysia requires the Prime Minister to command the
confidence of the majority in the lower house of Parliament. The Cabinet is chosen from
among members of Parliament and is collectively responsible to that body. Legislative
power is divided between Federal and State legislatures. Parliament makes federal laws
applicable to Malaysia as a whole. It also examines the Government’s policies, approves
the Government’s expenditure and new taxes and also serves as the forum for criticisms
and the focus of public opinion on national affairs.
The State Governments are headed by State Rulers. Each Ruler acts on the advice of the
relevant State Executive Council that is chaired by the Chief Minister (or Menteri Besar).
All states have their own legislatures.
Further information on the machinery of the Malaysian Government can be obtained at
http://www.gov.my/MyGov/BI/Misc/GovMachinery.
Distribution of Powers between the Federal, State and Local
Governments
The distribution of executive and legislative powers between the Federal and State
Governments is embodied in the Federal Constitution of Malaysia. The Federal Government
has authority over, among others, external affairs, defence, internal security, civil and
criminal law and the administration of justice (except civil law cases among Malays or
other Muslims which are adjudicated under Islamic law), federal citizenship, finance,
trade, commerce, industry, shipping, communications, transportation, power, education,
medicine, health, labour and tourism.
pg. 25
investing in
iskandar

The State Governments have, in their respective States, authority over, among others, land,
Local Government and services of a local character such as markets, fairs and licensing of
places of public amusement.
Both the Federal and State Governments have concurrent jurisdiction over social welfare,
town and country planning, public health, sanitation, drainage, irrigation, as well as housing
and provision for housing accommodation, among others.
As in most countries, Malaysian local authorities carry out urban management functions
including planning and building control and general maintenance functions of urban
infrastructure.
2.4
2.5
Independence of the Judiciary
A key feature of the Malaysian legal system rests in the independence of the Judiciary
from the Executive. This principle is embodied in the Malaysian Constitution.
Malaysian Court System
The structure of the Malaysian Court System is similar to that of other Commonwealth
countries, comprising Superior Courts and Subordinate Courts. The profile of each of
these is briefly outlined below:
2.5.1 Superior Courts
The Superior Courts comprise the Federal Court, the Court of Appeal and the High
Courts, the Federal Court being the highest court in the country.
The High Courts oversee and have general jurisdiction over matters heard in the
Subordinate Courts in relation to both civil and criminal matters. As regards civil
matters, the High Court must hear matters involving claims of over RM250,000.
Such claims cannot be heard in the Subordinate Courts.
Appeals against decisions of the High Court (on both civil and criminal matters) are
heard by the Court of Appeal. In certain instances, the leave of the Court of Appeal
must first be obtained.
The Federal Court deals with appeals from the Court of Appeal on both civil and
criminal matters. In cases involving criminal matter, the Federal Court will only hear
the appeal where the case originated at the High Court.
2.5.2 Subordinate Courts
The Subordinate Courts comprise the Magistrates’ Courts and the Sessions
Courts.
The Magistrates’ Courts hear all civil matters in respect of claims which do not
exceed RM25,000. For criminal matters, the Magistrates have the authority to try
all criminal cases where the offences involve a maximum term of imprisonment of
10 years.
The Sessions Courts have authority to hear all civil matters where the claims are
between RM25,000 - RM250,000. However, the jurisdiction of the Sessions Court
is unlimited in relation to matters involving landlord and tenant issues and motor
vehicle accidents. As regards criminal matters, the Sessions Courts have the
authority to hear all criminal matters except those involving capital punishment.
Additionally, there are Syariah Courts which operate independently of the above Court
System in relation to matters involving Islamic laws and Muslims. These courts do not
have jurisdiction over non-Muslims.
pg. 26
investing in
iskandar

Chapter 3
3
Business Environment
3.1 A snapshot of the current economic situation and
projected economic growth
3.2 The Ninth Malaysia Plan (9MP) and Third Industrial Master Plan (IMP3)
3.2.1 the Ninth Malaysia Plan (9MP)
3.2.2 The Third Industrial Master Plan (IMP3)
3.3 Inflation rate
3.4 interest rate
3.5 Knowledge workers
investing in
iskandar

Malaysia has undergone tremendous economic transformation
over the years to emerge as one of the fastest-growing economies in the region

usiness
environment
Chapter 3
Business Environment
3.1
A snapshot of the current economic situation and projected economic
growth
Malaysia has gone through tremendous economic transformation which helped the
country to make great strides in socio-economic development over the last 40 years.
During the 1970s and 1980s, Malaysia was predominantly a commodity-based economy.
The agriculture and mining sectors accounted for more than 1/3 of real gross domestic
product (GDP) and over 3/4 of total exports.
In the late 1980s, Malaysia took several critical steps to essentially diversify the structure
and strengthen the resilience of the economy as well as diversify the country’s exports.
Hence the source of foreign exchange earnings. These included liberalising foreign
investment in manufacturing industry and opening up the trade sector, supported by
development and modernisation of enabling physical infrastructure, plus attractive tax and
non-tax incentives.
These moves served as catalysts that propagated the industrialisation of the
Malaysian economy, driven by export-oriented foreign direct investment (FDI) into the
manufacturing sector. Consequently, Malaysia’s real GDP growth hit a high of 9.5%
per annum between 1990 and 1996, compared with the average of 7% per annum in
the preceding two decades.
This in turn has steadily raised the manufacturing sector’s contribution to the Malaysian
economy over the past 20 years in terms of its share of output and exports to more
than 30% and 80% presently, from just 10% of real GDP and 20% of total gross exports
back in 1970. Thanks to this successful structural shift in the Malaysian economy, the
country’s per capita income is now around RM21,000 (USD5,700) from just over RM1,000
(USD350) back in 1970.
Malaysia: Real GDP Growth (% p.a.)
1970- 1980- 1990- 2000- 1H
79 89 99 06 2007 2007 2008 9MP IMP3
Real GDP 8.2 5.9 7.2 5.5 5.6 6.0 6.0-6.5 6.0 6.3
Manufacturing 14.4 9.4 10.0 7.0 1.8 3.1 3.8 6.7 5.6
Services 9.0 7.1 9.1 5.9 9.4 9.0 8.6 6.5 7.3
Agriculture 6.7 3.5 0.2 3.9 0.6 3.1 3.5 5.0 5.2
Mining 7.7 3.5 4.6 1.6 3.4 3.3 4.0 3.4 3.4
Construction 8.6 3.4 9.0 0.7 4.4 5.2 6.3 3.5 5.7
Private Consumption 6.7 4.8 5.7 7.7 10.8 9.0 7.9 6.9 N/A
Government Consumption 9.5 6.0 6.0 8.1 8.8 10.8 5.5 5.3 N/A
Fixed Capital Formation 13.8 7.6 8.5 6.2 8.1 10.8 5.0 7.9 N/A
Exports (Goods & Services) N/A N/A 12.7 7.3 2.5 4.1 5.7 7.1 N/A
Imports (Goods & Services) N/A N/A 12.5 9.1 2.4 6.2 6.6 7.9 N/A
9MP covers the period 2006 - 2010
IMP3 covers the period 2006 - 2020
Source: Bank Negara Malaysia, Department of Statistics, Ministry of Finance’s Economic Report 2007/2008,
9MP, IMP3
pg. 29
investing in
iskandar

Malaysia: Share of Real GDP (%)
1970 1980 1990 2000 1H2007 2010 2020
Manufacturing 10.3 17.6 25.6 30.9 30.3 32.4 28.5
Services 38.3 42.5 47.6 49.3 53.3 59.2 66.5
Agriculture 26.0 21.0 14.9 8.6 7.5 7.8 7.0
Mining 13.8 12.1 9.0 10.6 8.7 5.9 4.4
Construction 4.2 4.7 3.7 3.9 3.0 2.4 2.5
Private Consumption 64.6 54.9 52.2 43.8 50.8 52.1 N/A
Government Consumption 13.7 11.0 13.4 10.2 11.1 14.3 N/A
Fixed Capital Formation 21.7 34.1 33.9 25.3 23.7 29.2 N/A
Exports (Goods & Services) N/A N/A 72.4 119.8 119.3 126.9 N/A
Imports (Goods & Services) N/A N/A 71.3 100.6 104.9 122.4 N/A
Source: Bank Negara Malaysia, Department of Statistics, 9MP, IMP3
Malaysia: Real GDP Growth & Per Capita Income
25,000
15
21,000
17,000
10
5
13,000
9,000
5,000
0
(5)
1,000
(10)
1970
1973
1976
1979
1982
1985
1988
RM %
1991
1994
1997
2000
2003
2006
GDP per Capita (RHS)
Real GDP (LHS)
Source: Bank Negara Malaysia Annual Report 2006, Department of Statistics
pg. 30
investing in
iskandar

usiness
environment
Malaysia: Approved Manufacturing Investment & FDI
50
8
40
6
RM (billion)
30
20
4
USD (billion)
10
2
0
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Approved Manufacturing Investment (LHS)
Source: MIDA, UNCTAD
FDI (RHS)
Malaysia: Share of Total Exports (%)
100
80
60
40
20
0
1970 1980 1990 2000 1H 2007
Manufacturing
Commodities
Source: Bank Negara Malaysia, Department of Statistics
Post-Asian financial crisis in 1997-1998, the Malaysian economy recorded a respectable
growth of 5.5% per annum up to the year 2006. Real GDP growth was sustained at 5.6%
in the first 6 months of 2007, driven mainly by the robust growth in the services sector on
the back of strong domestic consumption expenditure – especially consumer spending.
In addition, the construction sector is recovering, driven by higher Government spending
on infrastructure and specific policy initiatives for the property sector. The high-end
residential market in particular is flourishing.
Performance in the first half of 2007 implies that the Malaysian economy is on the right
track to achieve real GDP growth of 6% per annum up to 2010. For 2007-2008, the
Malaysian economy is expected to expand by between 6% and 6.5%. Growth will be
driven largely by domestic demand – consumer, business and Government spending – this
translates into continued robust growth for the services sector and sustained recovery for
the construction sector.
At the same time, the mining sector is expected to benefit from higher investment and
output from the oil & gas industry current up-cycle with the commencement of the
‘development & production’ phase after the earlier ‘exploration & discovery’ stage.
pg. 31
investing in
iskandar

Overall, the Malaysian economic growth performance in the post-Asian financial crisis
period indicates that the Government’s efforts to further reinvent the economy are bearing
fruit and producing the desired results. The latest phase of economic restructuring is
principally in terms of:
• moving up the value-added and technology ladders as well as broadening the supply
chains in existing growth areas, namely the manufacturing sector and resource-based
industries such as oil & gas
• promoting and developing new growth areas such as tourism, Islamic finance and
distributive trade services as well as biotechnology
3.2
The Ninth Malaysia Plan (9MP) and Third Industrial Master Plan (IMP3)
Underpinning the Government’s policies in charting the future growth path and development
course for the Malaysian economy are the Ninth Malaysia Plan (9MP, 2006-2010) and the
Third Industrial Master Plan (IMP3, 2006-2020).
3.2.1 The Ninth Malaysia Plan (9MP, 2006-2010)
The 9MP, unveiled in March 2006, marked the start of the final 15-year phase
for Malaysia to complete its mission and achieve the target of becoming a fully
developed nation by the year 2020. Underlying the 9MP are 5 thrusts as the guiding
principles to lay the foundations and pave the way for economic growth and
development. These are:
• Moving the Malaysian economy up the value-added chain. This, among
others, entails ‘up-scaling’ value-added manufacturing and manufacturingrelated
service industries; strengthening the role and contribution of the
agriculture and agro-based industries; income, employment and trade;
promoting the services sector – especially tourism, finance and distributive trade
– as a vibrant source of growth; mainstreaming information and communications
technology (ICT); and promoting new growth areas like biotechnology.
• Raising the capacity for knowledge and innovation and nurturing a firstclass
mentality, principally by enhancing human capital development via
investments and reforms in the education system, skills training and upgrading
programmes; harnessing science, technology and innovation to promote
research & development (R&D) activities and raising ‘knowledge content’ in
the economy; and empowering women and youth.
• Addressing the persistent socio-economic inequalities constructively
and productively. This is underpinned by a continued commitment to eradicate
poverty, promote fair income and wealth distribution, and close the rural-urban
and interstate development gaps via more balanced investment and economic
growth across the country.
In this regard, regional economic blueprints are of significant importance, of
which the ones for Southern Johore (the Iskandar Development Region or
Iskandar) and the northern States of Penang, Kedah, Northern Perak and Perlis
(Northern Corridor Economic Region or NCER) have already been unveiled.
The development master plans for the Eastern Corridor States (Kelantan,
Terengganu and Pahang) and East Malaysia (Sabah and Sarawak) are expected
to be announced by the end of this year.
• Improving the standard and sustainability of quality of life by improving
and upgrading infrastructure, utilities, housing, urban transportation and health
services as well as managing and protecting the environment.
pg. 32
investing in
iskandar

usiness
environment
• Strengthening the institutional and implementation capacity, namely
via an efficient public service delivery system and good governance.
Substantial progress has been made on this front.
The establishment of a Special Taskforce to Facilitate Business (PEMUDAH)
resulted in improvements in the approval procedures for the property
sector; shortening the time frame for tax refund (to 14-30 days from 1
year), registration of new businesses (to 1 hour from 3 days), processing
of expatriate work permit applications (to 7 days from 14 days), approving
the Environmental Impact Assessment (EIA) report for business licensing
(to 5 weeks from 3 months); and the introduction of online applications
and approvals for business licensing in the manufacturing sector i.e.
Business Licensing Electronic Support system (BLESS).
In ensuring the progress towards achieving the ‘National Mission’, the Government
has allocated a total of RM200 billion for development spending under the 9MP (8MP,
2001-2005: RM170 billion) plus another RM595.5 billion for operating expenditure (8MP:
RM396.7 billion).
GDP by Industry Origin 2000 - 2010
8Mp
9MP
GDP by Industry Origin target achieved target
Agriculture, Forestry, Livestock & Fishing 2.0% 3.0% 5.0%
Mining & Quarrying 2.9% 2.6% 3.4%
Manufacturing 4.0% 4.1% 6.7%
Construction 2.5% 0.5% 3.5%
Services: 5.2% 6.1% 6.5%
Government Services 4.5% 6.7% 4.5%
Business & Non-Government Services 5.3% 6.0% 6.7%
Electricity, Gas & Water 5.8% 5.6% 5.9%
Transport, Storage & Communications 5.8% 6.6% 6.7%
Wholesale and Retail Trade, Hotels and Restaurants 3.6% 4.3% 6.8%
Finance, Insurance, Real Estate and Business Services 7.0% 8.1% 7.0%
Other Services 5.0% 4.8% 6.6%
GDP 4.2% 4.5% 6.0%
Source: 9MP
GDP by Expenditure 2000 - 2010
8Mp
9MP
GDP by expenditure target achieved target
Consumption 6.1% 7.4% 6.5%
Private 5.2% 6.6% 6.9%
Public 9.4% 10.2% 5.3%
Gross Fixed Capital Formation 0.9% 1.6% 7.9%
Private -2.3% -1.0% 11.2%
Public 3.8% 3.9% 5.0%
Exports 2.0% 5.2% 7.1%
Imports 1.9% 5.6% 7.9%
GDP 4.2% 4.5% 6.0%
Source: 9MP
pg. 33
investing in
iskandar

3.2.2 The Third Industrial Master Plan (IMP3)
The 9MP is complemented by the IMP3 that seeks to strengthen Malaysia’s global
competitiveness through the transformation, development and promotion of the
manufacturing, services and agriculture sectors. The 10 strategic thrusts of the
IMP3 are:
• Enhancing Malaysia’s position as a major trading nation
• Generating investment in targeted growth areas
• Integrating Malaysian companies into regional and global supply chains and
networks
• Ensuring industrial growth contributes towards equitable distribution and more
balanced regional development
• Sustaining the manufacturing sector’s contribution to growth via targeted nonresource
based industries (E&E, medical devices, textiles & apparel, machinery
& equipment, transport equipment, metals) and resource-based industries
(petrochemicals, pharmaceuticals, wood-based, rubber-based and oil-palm
based and food processing)
• Positioning the services sector as a major source of growth by promoting
and developing targeted service industries (business & professional services,
integrated logistics, tourism, education & training, healthcare, ICT, distributive
trade, construction services)
• Facilitating the development and application of knowledge-intensive industries
• Developing innovative and creative human capital
• Strengthening the role of private sector institutions, including trade and industry
associations
• Creating a more competitive business operating environment through effective
institutional support and an efficient Government delivery system
With the implementation and execution of the 9MP and IMP3, the Malaysian
economy is projected to grow by 6.3% per annum between 2006 and 2020, on the
basis of:
• a global real GDP growth of 3.5% per annum
• a sustained manufacturing sector growth momentum
• the services sector becoming a new major source of growth and exports
• the enhanced role and contribution of the agriculture sector to growth and
exports
• quality investments by both private sector and Government-linked companies
• the greater efficiency and effectiveness of the public sector delivery system
pg. 34
investing in
iskandar

usiness
environment
3.3
Inflation rate
Malaysia has been able to achieve sustained economic growth over the years with a
relatively stable inflation environment. Between 1970 and 2006, real GDP growth of 6.8%
per annum was accompanied by an average inflation rate – measured by the Consumer
Price Index (CPI) – of 3.8%.
By and large, periods of high inflation rates in Malaysia are externally induced, namely
the first and second oil price shocks in the early 1970s and early 1980s, as well as the
currency devaluations during the Asian financial crisis of 1997-1998. Excluding these
specific episodes of high-inflation periods, Malaysia’s inflation rate has averaged at
just 2.8% over the long term.
For the first 7 months of 2007, inflation rate averaged 2%, down from 3.6% last year, and
is expected to be within the 2%-2.5% range for the full year. The easing of inflationary
pressures mainly reflects the Government’s decision to maintain fuel subsidies and hence
keep domestic retail fuel prices stable.
inflation rate trend in malaysia
7.0
6.0
5.0
4.0
Average 3.0%
3.0
2.0
1.0
%
Jan-91
Jan-94 Jan-97 Jan-00 Jan-03 Jan-06
Source: ceiC
3.4
Interest rate
As regards interest rates, the movements of key interest rates such as the base lending
rate, the 3-month KLIBOR and 3-month fixed deposit rate has largely been in tandem with
the inflation rate. This reflects the monetary policy objective of promoting price stability
and sustainable economic growth.
Given the near-term outlook of stable and low inflation rate and amidst ample domestic
liquidity, interest rates are largely expected to remain stable.
Meanwhile, Malaysia’s exchange rate has completed a full circle. Before June 1972, the
Malaysian Ringgit was pegged to the British Pound Sterling. Then, it was briefly pegged
to the US Dollar before floating in June 1973. Under the ‘flexible’ exchange rate regime,
the Malaysian Ringgit was monitored against a basket of currencies of Malaysia’s major
trading partners and major currencies used in international settlements.
However, from time to time, the Central Bank, Bank Negara Malaysia, intervened in the
foreign exchange market to ensure an orderly movement and to prevent excessive volatility
in the currency, especially with the liberalisation of the economy that resulted in increased
capital flows, including short-term capital.
pg. 35
investing in
iskandar

As a result, the Malaysian Ringgit moved within a fairly narrow range against the US Dollar
over a 20-year period up to 1996. However, excessive volatility and speculation in the
currency and capital markets during the 1997-1998 Asian financial crisis necessitated the
reversal in Malaysia’s exchange rate regime.
The Malaysian Ringgit was pegged to the US Dollar at RM3.80 and selective capital
controls were introduced in September 1998 as temporary measures that essentially
aimed to provide a stable environment for consolidation, restructuring and reform,
especially in the balance sheets and operations of the banking and corporate sectors, after
which the selective capital control measures were eventually removed. The Malaysian
Ringgit was finally de-pegged from the US Dollar in July 2005, bringing currency back
to ‘managed floating’.
Malaysia: Annual Inflation Rate (%)
18
15
12
9
6
3
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Source: Bank Negara Malaysia, Department of Statistics
Malaysia: Interest Rates (% p.a.)
15
12
9
6
3
%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Base Lending Rate 3-mth KLIBOR 3-mth FD Rate
Source: Bank Negara Malaysia
pg. 36
investing in
iskandar

usiness
environment
Malaysia: End-Period Exchange Rate (RM per USD)
4.00
3.75
3.50
3.25
3.00
2.75
2.50
2.25
2.00
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
Source: Bank Negara Malaysia
3.5
Knowledge workers
To meet the needs of the economy and the growth plans under the 9MP and IMP3, it is
crucial that Malaysia has a sufficient supply of knowledge workers. In the 9MP, the labour
force in Malaysia is projected to increase by 10% in 2010 (as compared to the labour force
in 2005) to achieve the targeted labour force of 12.4 million persons. Based on these
statistics, it is anticipated that the labour force in Malaysia would make up more than 40%
of the total population by 2010.
In line with the greater focus on human
capital development:
• a total of RM45 billion will be
allocated during the 9MP period to
implement various education and
training programmes; and
• the Government through concerted
efforts with the local education
industry players has established new
universities, university colleges,
branch campuses, polytechnics and
community colleges. In addition,
the capacity of existing local
universities has been expanded to
provide greater access to higher
education in order to increase the
supply of knowledge workers.
tertiary education institutions 1 ,
2000 & 2005
Institution 2000 2005
Public
University 11 11
University College 0 6
Polytechnic 11 20
Community College 0 34
Total 22 71
Private
University 5 11
University College 0 11
Branch Campus 3 5
College 632 532
Total 640 559
Total 662 630
Source: Ministry of Higher Education
Notes: Refers to University, University
College, Branch Campus, College,
Polytechnic and Community College.
pg. 37
investing in
iskandar

The supply of knowledge workers currently comes from an existing pool of experienced
workers as well as graduates from various tertiary institutions in Malaysia, including a
large number of foreign students currently pursuing tertiary education in the country.
The Government allows ‘importation’ of knowledge workers in areas where skills are not
sufficiently available in the relevant industries.
enrolment in tertiary education institutions by levels of study,
2000 - 2010
Numbers of Students
Level of Study 2000 2005 2010
public Private Total Public Private Total Public Private Total
Certificate 23,816 81,754 105,570 37,931 94,949 132,880 141,290 143,480 284,770
Diploma 91,398 117,056 208,454 98,953 131,428 230,381 285,690 188,680 474,370
First Degree 170,794 59,932 230,726 212,326 110,591 322,917 293,650 134,550 428,200
Masters 24,007 2,174 26,181 34,436 4,202 38,638 111,550 5,770 117,320
PhD 3,359 131 3,490 6,742 140 6,882 21,410 270 21,680
Total 313,374 261,047 574,421 390,388 341,310 731,698 853,590 472,750 1,326,340
Average Annual Growth Rate (%)
2001-2005 2006-2010
Public Private Public Private
9.8 3.0 30.1 8.6
1.6 2.3 23.6 7.5
4.4 13.0 6.7 4.0
7.5 14.1 26.5 6.5
15.0 1.4 26.0 14.0
4.5 5.5 16.9 6.7
Source: Ministry of Higher Education
OUTPUT OF SKILLED AND SEMI-SKILLED HUMAN RESOURCEs BY COURSE,
2000 - 2010
Numbers of TRAINEES
Course 2000 2005 2010
public Private Total Public Private Total Public Private Total
Engineering 16,428 9,730 26,158 31,633 17,337 48,970 56,330 44,627 100,957
Mechanical 9,606 2,232 11,838 17,380 4,866 22,246 30,966 10,608 41,574
Electrical 5,234 7,378 12,612 11,677 12,221 23,898 19,828 33,498 53,326
Civil 1,588 120 1,708 2,576 250 2,826 5,536 521 6,057
Building Traders 1,417 547 1,964 2,566 1,200 3,766 4,232 2,633 6,865
Information &
Communications
Technology 903 7,520 8,423 1,016 11,844 12,860 1,853 12,866 14,739
Others 2,133 928 3,061 3,550 2,730 6,280 9,379 1,630 11,009
Total 20,881 18,725 39,606 38,765 33,111 71,876 71,794 61,772 133,566
Average Annual Growth Rate (%)
2001-2005 2006-2010
Public Private Public Private
14.0 12.2 12.2 20.8
12.6 16.9 12.2 16.9
17.4 10.6 11.2 22.3
10.2 15.8 16.5 15.8
12.6 17.0 10.5 17.0
2.4 9.5 12.8 1.7
10.7 24.1 21.4 -9.8
13.2 12.1 13.1 13.3
Source: Manpower Department, Ministry of Youth and Sports, National Vocational Training Council, Ministry of
Agriculture and Agro-Based Industry, Majlis Amanah Rakyat and Construction Industry Development Board Malaysia
Sources:
1 The Ninth Malaysia Plan 2006-2010, Economic Planning Unit, Prime Minister’s Department (March 2006)
2 Bank Negara Malaysia Annual Reports (Various Issues)
3 Economic Reports, Ministry of Finance (Various Issues)
4 The Third Industrial Master Plan 2006-2020 (August 2006)
pg. 38
investing in
iskandar

Chapter 4
Foreign Investment
4
4.1 Foreign Investment Committee (FIC)
4.1.1 Broad Equity Policy
4.1.2 Acquisition of Real Estate/ Property by Foreign Parties
investing in
iskandar

supported by many positive factors,
malaysia makes an ideal destination for foreign investment

foreign
investment
Chapter 4
Foreign Investment
Overview of Foreign Investment in Malaysia
Malaysia has always encouraged foreign investment. The country’s foreign investment
policy falls within the purview of the Economic Planning Unit (EPU) in the Prime Minister’s
Department. The EPU has a Foreign Investment Committee which oversees foreign
investment in the country and implements the relevant foreign investment policies with
the assistance of various agencies including Malaysia Industrial Development Authority
(MIDA), which coordinates the incentives for these investors.
4.1
Foreign Investment Committee (FIC)
Foreign investors must apply to the FIC for approval in respect of certain transactions
as set out in the FIC’s administrative guidelines (FIC Guidelines). These guidelines
do not have statutory force, but compliance is encouraged. In practice, the FIC
Guidelines are enforced through other Government agencies as a condition to the
granting of approvals, etc., particularly where a foreign investor wishes to participate
in a government-regulated sector.
However, as an integral part of the non-fiscal incentive to attract foreign investment
in Iskandar, IDR-status companies located in the approved node within Iskandar will be
exempted from all FIC requirements.
The FIC Guidelines currently in force are those relating to:
• The acquisition of properties by local and foreign interests
• The acquisition of interests, mergers and takeovers by local and foreign interests
The FIC Guidelines can be found at http://www.epu.jpm.my.
4.1.1 Broad Equity Policy
The broad principle underlying Malaysia’s foreign investment policy is that foreign
parties should not hold more than 70% equity in a Malaysian company, while the
remaining 30% should be owned by Bumiputras (who are the indigenous race of
Malaysia). For companies whose activities involve areas of national interests such
as water and energy supply, broadcasting, defence and security, foreign interest is
usually limited to 30%.
The above general principle has been gradually relaxed and a 100% foreign equity
ownership is permitted in several circumstances. These include the following:
• New manufacturing companies;
• Companies granted MSC Malaysia status
• Companies granted International Procurement Company (IPC) status, Operational
Headquarters (OHQ) status and Regional Distribution Centre (RDC) status
pg. 41
investing in
iskandar

4.1.2 Acquisition of Real Estate/Property by Foreign Parties
Any acquisition of property by foreign interests requires the approval of the FIC,
which will take into account several factors including the following:
• Foreign interests are only allowed to acquire property valued at more than
RM150,000 per unit with no limit on the numbers of property acquired
• The State Authority has the discretion to consider the acquisition based on the
area or location of the property, types of property and percentage of the total
units in a project
• Financing from internal and external sources are allowed for all acquisitions of
properties
• Where foreign interests acquire commercial property for their own use, they
are not required to incorporate a company to acquire the property where the
property is valued at less than RM10 million
• Foreign interests are allowed to acquire industrial property without any price
limit provided the property is registered under a locally-incorporated company
and subject to any other conditions for acquisition
• Leasing of property for a term of 10 years and above by foreign interests
requires the FIC’s approval
• Disposals of property by one foreign interest to another foreign interest requires
the FIC’s approval
• Disposals of property valued at less than RM20 million by foreign interests to
local interest does not require the FIC’s approval, but the latter needs to be
notified
• The charging of Malaysian properties to foreign interests requires the approval
of the FIC and will be allowed if the related loan is to be utilised for business
operations in Malaysia only
pg. 42
investing in
iskandar

Chapter 5
Banking System
5.1 Financial Institutions
5
5.2 Malaysia as an International Islamic Financial Centre
5.3 International Offshore Financial Centre
5.4 Capital Market
5.4.1 Equity Instruments
5.4.2 Debt Securities
5.4.3 Derivatives
5.4.4 Islamic Instruments
investing in
iskandar

with a strong and efficient banking and financial climate,
malaysia is well-positioned to become a leading financial centre in the region

anking
system
Chapter 5
Banking System
Overview of the Banking System in Malaysia
The Central Bank, Bank Negara Malaysia (BNM) has been vested with legal powers to
regulate the financial system under the Banking and Financial Institutions Act 1989 and
formulate a comprehensive banking system in Malaysia.
BNM is responsible for maintaining monetary stability and ensuring the smooth and
seamless operation of the financial system. BNM’s regulatory policies are managed
to ensure that these requirements are met. BNM is responsible for the issuance
of the Malaysian currency (the Malaysian Ringgit) and acts as a banker/economic/
financial adviser to the Government. In addition, it administers the country’s foreign
exchange control regulations.
5.1
5.2
Financial Institutions
Integral to the Malaysian banking system are the locally-owned commercial banks and
locally-incorporated foreign commercial banks. These commercial banks operate via a
wide network of branches throughout the country. A few domestic banks have presence
in other countries through branches, subsidiaries and joint ventures. In addition, there
are 16 foreign banks currently operating in Malaysia, including Citibank, HSBC, Standard
Chartered, Al-Rajhi Bank, Deutsche Bank and Kuwait Finance House.
Aside from domestic and foreign commercial banks, there are currently more than 10
investment banks operating in Malaysia. These investment banks play an important role in
the short-term money market and capital markets. Their activities range from underwriting
of borrowings, loans syndication, corporate finance and management advisory services,
listing arrangements for Initial Public Offerings (IPOs) as well as investment portfolio
management.
With the recent momentum to streamline efficiencies and achieve synergy, mergers
between merchant banks, stockbroking companies and discount houses have taken place
and will continue in the future, thus creating a more efficient, effective and competitive
banking sector.
Islamic banking is currently a key focus area of the Government, as is explained in more
detail below (refer to 5.2).
Malaysia also has various financial institutions established with a view to promote
development in particular sectors such as agriculture, manufacturing and exports, small to
medium-scale enterprises, and others.
Malaysia as an International Islamic Financial Centre
In recent years, it has been acknowledged in the global market that Malaysia has emerged
as one of the leading Islamic financial centres due to the concerted and continuous efforts
by the Government in developing this sector. At present, there are 11 Islamic banks
operating in Malaysia, providing a full range of Islamic financial services. It is also a growing
trend for conventional banks to offer Islamic banking facilities and products.
In its strategic efforts to make Malaysia a regional hub for Islamic banking, the Government
has established the International Islamic Financial Centre (MIFC). The MIFC will focus on
the following niche activities:
• Origination, distribution and trading of Islamic capital market and treasury instruments
• Islamic fund and wealth management services
• International currency Islamic financial services (including deposits and financing)
• Takaful and retakaful
pg. 45
investing in
iskandar

pg. 46
investing in
iskandar
5.3
The focus of the MIFC is to position Malaysia as a centre of excellence for Islamic banking
and finance, education, training, consultancy and research.
To attract more players into the realm of the Malaysian Islamic financial system, several
measures have been taken by the Government including:
• New licences will be issued under the Islamic Banking Act 1983 to qualifying foreign
and Malaysian financial institutions, permitting such institutions to undertake the full
range of Islamic banking business with non-residents and residents in international
currencies. Such approved entities will enjoy a tax exemption for 10 years on income
from businesses undertaken in international currencies.
• New licences will be issued under the Takaful Act 1984 to qualifying foreign and
Malaysian financial institutions to undertake the full range of takaful business with
non-residents and residents in international currencies. Such entities will also enjoy a
similar tax exemption.
• Labuan offshore Islamic banks, offshore Islamic investment banks, offshore takaful
companies and Islamic divisions of offshore banks and offshore insurance companies
will be allowed to establish operating offices anywhere in Malaysia, thereby granting
such entities greater flexibility to carry out their businesses and opportunity to
penetrate the Malaysian market.
• Up to 49% foreign equity in Malaysian Islamic banks and takaful operators will be
allowed.
• Fund managers licensed under the Securities Industry Act 1983 will be given
100% income tax exemption on management fee income for 10 years (from year
of assessment 2007 until year of assessment 2016) for managing funds of foreign
investors, based on Syariah principles. It has been proposed in the 2008 Budget that
similar tax exemption be given on fees received from managing Islamic funds for local
investors from year of assessment 2008 to year of assessment 2016.
In March 2006, Malaysia has established the International Centre for Education in Islamic
Finance (INCEIF) to develop talents including professionals and specialists in Islamic finance
who are much needed to sustain market competitiveness and meet future challenges in
the Islamic financial industry. BNM has established an endowment fund of RM500 million
to support this initiative.
INCEIF will offer professional certification programmes in Islamic finance by adopting
unique pedagogical approaches and the latest teaching techniques in supplying a stream
of knowledge and skills. INCEIF will also forge strategic alliances with domestic and
foreign academic institutions to offer post-graduate programmes, namely Masters and
Doctorates in Islamic Finance with specific areas of specialisation.
International Offshore Financial Centre
The Malaysian Government established a fully-integrated International Offshore Financial
Centre (IOFC) in October 1990. The IOFC is based in Labuan, an island off the coast of
East Malaysia.
The IOFC was established with the aim of enhancing the attractiveness of Malaysia as an
investment centre, to complement and supplement the onshore financial sector in Kuala
Lumpur. There are presently over 50 offshore banks operating in the IOFC.
The IOFC has been developed with infrastructure facilities comparable to other established
offshore financial centres. As part of Malaysia, the IOFC enjoys political stability as well as
relatively low costs of operation and similar time zone with other major Asian cities.
The IOFC offers various financial products and services to investors globally, including
banking and investment banking, insurance, captive insurance, fund management, Islamic
financing, etc. Offshore entities in the IOFC are required to transact in foreign currency
and there are limitations with respect to business dealings with Malaysian residents.

anking
system
However, offshore banks are permitted to borrow and lend money to Malaysian residents,
as well as extend loans to foreigners for the purpose of acquiring real estate in Malaysia.
The offshore entities are governed by a separate set of offshore legislation, distinct
from that governing Malaysian entities. Companies in the IOFC deriving offshore
trading income enjoy preferential tax treatment with the option of being taxed at 3%
of net audited profits or paying a tax of RM20,000. However, as proposed in the 2008
Budget, an IOFC entity may elect for its income from offshore business activities to be
taxed under the Income Tax Act 1967.
The offshore entities are regulated by the Labuan Offshore Financial Services Authority
(LOFSA) which was set up on 15 February 1996 as a single regulatory body. LOFSA
works closely with BNM and the Ministry of Finance to implement policies that facilitate
a competitive and attractive offshore business environment. Over the years, a greater
convergence with the domestic banking sector has been achieved.
5.4
Capital Market
Capital market in Malaysia is regulated by the Securities Commission (SC), which was
established in 1993. The SC is a statutory body which is self-funding and has both
enforcement and investigative powers. It reports to the MOF and has responsibility for the
regulation and development of the capital market as a whole, with specific responsibility
over several areas including the following:
• Offering and issuance of securities by public companies
• Issuance of debentures by private companies
• Listing of securities on Bursa Malaysia (the Malaysian Stock Exchange)
• Matters relating to mergers and takeovers of Malaysian companies
• Unit trust schemes and real estate investment funds
The Malaysian capital market allows the Government and corporations to raise funds
through the following:
• Equity instruments
• Debt securities
• Derivatives
• Islamic instruments
The following is a brief overview of each of these instruments:
5.4.1 Equity Instruments
Equity instruments in Malaysia comprise shares which can be listed on Bursa
Malaysia. Bursa Malaysia consists of a Main Board, a Second Board and the
Malaysian Exchange of Securities Dealing and Automated Quotation (MESDAQ).
Currently, Bursa Malaysia is one of the largest bourses in ASEAN with a listing of
over 1,000 Malaysian companies with total market capitalisation of approximately
RM700 billion. Equity instruments also include warrants and unit trusts.
5.4.2 Debt Securities
Debt securities are generally fixed income instruments which can be traded either
on the primary (listed) or secondary (‘over the counter’) market. In Malaysia, debt
instruments generally take the form of bonds or a variation of these, and such
instruments can be issued by the Government or the private sector. Government
Bonds typically include the following:
• BNM Monetary Notes
• Malaysian Treasury Bills
• Malaysian Government Securities
• Khazanah Bonds (which are guaranteed by the Government)
pg. 47
investing in
iskandar

Private bonds or similar instruments include some of the following:
• Corporate Bonds – e.g. straight bonds, bonds with warrants and convertible
bonds – these are usually long-term securities issued by corporations to meet
longer term financing requirements
• Medium-Term Notes – these would normally have a maturity period of 1 to 5 years
• Cagamas Instruments
• Commercial Papers – these would normally have a tenure of 1 to 12 months
• Asset-backed Securities
The above instruments may also be issued under Islamic principles in compliance
with Syariah principles.
5.4.3 Derivatives
The raising of funds through debt securities in Malaysia generally comprises the
trading of futures and options, which are essentially products whose value is
dependent on, or derived from the value of underlying instruments.
Derivative instruments are typically futures and options and are generally traded on
Bursa Malaysia or “over the counter”. A futures contract is an agreement between
two parties to buy or sell the underlying instrument at a certain date in the future,
at a specific price,
An option provides the holder or buyer the right, but not the obligation, to purchase
or sell a certain quantity of the underlying instrument at a stipulated price within a
specific time period by paying a premium.
5.4.4 Islamic Instruments
Islamic instruments are widely used in Malaysia to raise financing for both the
Government and private sectors. These instruments are issued in strict compliance
with Syariah principles and are increasingly used by Malaysian entities as a source
of financing.
There are a wide range of Islamic banking products and services available in Malaysia
through both Islamic and conventional banks, and these are generally based on the
following concepts:
• Fund-based:
- Tawarruq/Murabahah
- Mudharabah
- Musyarakah
- Ijarah
- Qard
- Bai’ Dayn
- Istisna’
• Fee-based:
- Murabahah
- Bai’ Dayn
- Kafalah
- Bai’ Bithaman Ajil
- Bai’ Inah
- Wakalah
- Rahnu (Qard and Wadiah Yad Dhamanah)
- Rahnu (Qard)
- Hiwalah
- Variable Rate Bai’ Bithaman Ajil
- Wakalah
- Ijarah
- Bai’ Bithaman Ajil
The Malaysian Government continues to provide various tax incentives to further
promote the use of Islamic financing in the country. Further, a USD57 million
endowment fund has been established to create a pool of Syariah experts in Islamic
finance and promote research and development to spur innovation in Islamic financial
products and services.
pg. 48
investing in
iskandar

Chapter 6
Exchange Controls
6.1 Exchange Control
6.1.1 External Accounts
6.1.2 Foreign Currency Accounts
6.1.3 Repatriation of Profits to Foreign Shareholders
6.1.3.1 Distribution of Dividends
6.1.3.2 Payment of Fees
6.1.3.3 Voluntary Liquidation/Capital Reduction
6.1.4 Foreign Credit Facilities
6.1.5 Provision of Credit Facilities to Non-Residents
6.1.5.1 Foreign Currency Credit Facilities
6.1.5.2 Ringgit Credit Facilities
6.1.6 IOFC Entities
6
6.2 FOREIGN EXCHANGE ADMINISTRATION POLICY FOR ISKANDAR
investing in
iskandar

The purpose of the foreign exchange administration policy
is to monitor capital flow into and out of the country with a view to
preserving Malaysia’s financial and economic stability

exchange
controls
Chapter 6
Exchange Controls
Exchange Control and Repatriation of Funds
6.1
Exchange Control
Malaysia has a liberal foreign exchange administration policy. The purpose of the foreign
exchange administration policy is to monitor capital flow into and out of the country with
a view to preserving Malaysia’s financial and economic stability. The foreign exchange
policies were tightened during the Asian financial crisis in the late 1990s but have since
been progressively liberalised and simplified.
The Exchange Control Act 1953, together with Exchange Control Notices of Malaysia
(ECMs) made pursuant to this Act, set out the regulatory framework for the Malaysian
exchange control regime. The ECMs set out clearly the types of transactions that require
approval from BNM, those which can proceed without approval, as well as those for which
approval is automatically granted, but for which notification is required.
For exchange control purposes, a “resident” is defined as:
• A citizen of Malaysia excluding a person who has obtained permanent residence in a
territory outside Malaysia and is residing outside Malaysia;
• A non-citizen of Malaysia who has obtained permanent residence status in Malaysia
and is residing permanently in Malaysia; or
• A person, whether body corporate or unincorporated, whether head office or branch,
incorporated or registered with, or approved by any authority in Malaysia.
The following sets out some of the more pertinent exchange control policies:
6.1.1 External Accounts
An External Account is a ringgit-denominated account belonging to a non-resident
or where the beneficiary of the funds in the account is a non-resident. A nonresident
may open and maintain any number of External Accounts with any licensed
onshore financial institutions in Malaysia with no restriction on the amount of ringgit
funds retained in such accounts.
The ringgit funds in an External Account can be used for payments to residents
for the purchase of ringgit assets or services provided in Malaysia. Funds in the
External Account can be converted into foreign currency with licensed onshore
banks and repatriated at any time.
6.1.2 Foreign Currency Accounts
Non-residents are permitted to open and maintain any number of foreign currency
accounts (FCAs) to retain any amount of foreign currency receipts with Malaysian
licensed onshore banks, licensed offshore banks in Labuan and overseas banks.
Funds in the accounts may be used for any purpose and can be converted into
ringgit with licensed onshore banks or may be repatriated at any time.
pg. 51
investing in
iskandar

A resident exporter may open an FCA with licensed onshore banks to retain any
amount of foreign currency export receipts.
Resident individuals or companies may convert ringgit into foreign currency and credit
this into an FCA onshore or offshore. Conversions of ringgit funds must comply with
the requirements in relation to investments in foreign currency assets.
6.1.3 Repatriation of Profits to Foreign Shareholders
Non-residents are free to repatriate capital, profits and income earned from
Malaysia including salaries, wages, royalties, commissions, fees, rental, interest,
profits or dividends.
Corporations can repatriate profits in several ways, including the following:
6.1.3.1 Distribution of Dividends
Dividends can be distributed out of retained profits to shareholders
(including foreign shareholders) without any withholding taxes. However,
as Malaysia operates a dividend imputation system, payment of dividends
is subject to the availability of dividend franking credits.
The absence of dividend franking credits will result in a tax charge on the
paying company. Where the company enjoys certain tax incentives, tax
exempt dividends may be paid out of exempt profits without the need for
franking credits. In this instance, where the shareholder is a Malaysian
resident company, it will be able to on-distribute these dividends as tax
exempt dividends to its shareholders (i.e. a “two-tier” tax exempt dividend
distribution system).
As proposed in the 2008 Budget, the dividend imputation system will be
replaced by a single tier system, effective from the year of assessment
2008. Under the single tier system, tax on a company’s profits is a final
tax and dividends distributed to shareholders will be exempt from tax.
6.1.3.2 Payment of Fees
Profit repatriation can also be achieved through the payment of fees,
e.g. technical or management fees, interest, royalties, etc. It should be
noted however, that such payments may be subject to withholding taxes.
Further, all such payments would need to be made at an arm’s length
basis to satisfy the tax authorities that such related party transactions do
not involve any transfer pricing element.
6.1.3.3 Voluntary Liquidation/Capital Reduction
Upon liquidation of a company or upon a capital reduction exercise
(which must be sanctioned by a court of law), capital can be returned to
shareholders without any tax implications.
pg. 52
investing in
iskandar

exchange
controls
6.1.4 Foreign Credit Facilities
Resident companies (on a corporate group basis) are permitted to obtain up to
RM100 million worth of foreign credit facilities from licensed onshore banks, nonresidents
or through the issuance of onshore foreign currency bonds. Individuals
are permitted to borrow up to the equivalent of RM10 million worth of foreign
currency, which can be used for any purpose.
6.1.5 Provision of Credit Facilities to Non-Residents
Residents are permitted to provide the following credit facilities to non-residents:
6.1.5.1 Foreign Currency Credit Facilities
• Onshore licensed banks may extend credit facilities in foreign currency
to non-residents for any purpose including credit facilities to finance or
refinance the purchase or construction of residential and commercial
property in Malaysia except for the purchase of land (also refer to the
FIC guidelines in Chapter 4).
• Resident corporations are permitted to grant foreign currency credit
facilities as follows:
- Any amount if funded from own foreign currency funds placed
onshore or offshore
- Any amount through the conversion of ringgit, provided the resident
corporation does not have domestic ringgit credit facilities
- A resident corporation with domestic ringgit credit facilities can
lend up to RM50 million on a corporate group basis per calendar
year through conversion of ringgit
- Up to the full amount of proceeds arising from an IPO on the
Malaysian stock exchange or foreign stock exchanges
6.1.5.2 Ringgit Credit Facilities
• Licensed onshore banks are permitted to grant up to RM10 million for
use in Malaysia
• All residents are allowed to extend any amount of credit facilities
in ringgit to non-residents to finance or refinance the purchase or
construction of any immovable property in Malaysia (excluding
purchase of land only)
• A non-bank resident may extend credit facilities in ringgit to a nonresident
not exceeding RM10,000 for any purpose
pg. 53
investing in
iskandar

6.1.6 IOFC Entities
There is a specific Exchange Control Notice for IOFC entities (i.e. ECM 15). IOFC
entities are viewed as non-residents and generally, the rules are more flexible
allowing such entities to carry out the following:
• Obtain any amount of foreign currency credit facilities
• Invest any amount in foreign currency assets
• Enter into foreign exchange contracts involving foreign currencies with licensed
onshore banks, licensed offshore banks and any overseas counterparty
• Buy or sell foreign currency (other than the currency of the State of Israel)
against ringgit with licensed onshore banks for permitted purposes
• Maintain External Accounts with licensed onshore banks to facilitate the
defrayment of statutory and administrative expenses in Malaysia
• Receive payments in ringgit from residents arising from fees, commissions,
dividends or interest from deposit of funds with onshore financial institutions
• Transact in ringgit financial products with licensed onshore banks or resident
brokers for its own account or on behalf of its non-resident clients
6.2
Foreign Exchange Administration Policy for Iskandar
As an incentive to promote Iskandar, IDR-status companies, approved developers and
approved development managers are given flexibilities under the foreign exchange
administration rules (refer Chapter 12.3 for further details).
pg. 54
investing in
iskandar

Chapter 7
Structure of
Business Entities
7.1 Companies incorporated in Malaysia
7.1.1 Forms of Companies
7.1.1.1 Companies limited by shares
7.1.1.2 Companies limited by guarantee
7.1.1.3 Companies limited by both shares and guarantee
7.1.1.4 Unlimited companies
7.1.2 Incorporation of a Company
7.1.2.1 Registration of a new company
7.1.2.2 Purchase of a ‘shelf company’
7.1.2.3 Who can incorporate a company?
7.1.3 Shareholders
7.1.3.1 Conditions and characteristics
7.1.3.2 Number of shareholders
7
7.2 Branches of Foreign Companies
7.3 Joint Ventures
7.4 Sole Proprietorship
7.5 Partnership
7.6 Representative Office/Regional Office
investing in
iskandar

various incentives and business-friendly regulations provide
the promise of exciting business opportunities in malaysia

structure
of business
entities
Chapter 7
Structure of Business Entities
Types of Business Entities Allowed to do Business in Malaysia
In Malaysia, a business may be conducted via:
• Locally-incorporated companies under the Companies Act 1965
• Branches of foreign companies registered under the Companies Act 1965
• Joint ventures
• Sole proprietorships
• Partnerships
Additionally, the Malaysian Government encourages foreign investors with regional
operations to set up in Malaysia by providing various tax and other related incentives to
the OHQ, RDC and IPC.
7.1
Companies incorporated in Malaysia
7.1.1 Forms of Companies
Malaysian companies can take several forms, namely, companies limited by shares,
companies limited by guarantee, companies limited by both shares and guarantee
and unlimited companies with share capital. These classifications indicate the
extent of the members’/shareholders’ liability. Further, companies can either be
private companies or public companies. In either instance, companies generally
take the form of companies limited by shares.
A private limited company cannot have more than 50 members. Further, a private
limited company can be classified as an ‘exempt private company’ where its
membership does not exceed 20 and its shares are not beneficially owned by
any corporation. An exempt private company is exempted from certain regulatory
requirements, such as the need to submit its balance sheet and profit and loss
account with its annual return.
A public company is one that does not fall within the definition of a private company.
Therefore, public companies would have more than 50 members and a listed public
company is one whose shares are listed on Bursa Malaysia.
7.1.1.1 Companies Limited by Shares
This is the most common legal form of a company in Malaysia. A
shareholder’s liability in such companies is limited to the quantum of any
amount remaining unpaid on their shares.
Where such companies are private limited companies, the name of the
company will be followed by the words ‘Sendirian Berhad’ (abbreviated
to ‘Sdn. Bhd.’), e.g. ABC Sdn Bhd. Where the companies are public
companies (i.e. the company has more than 50 members), the name of the
company will be followed by the words ‘Berhad’ (abbreviated to ‘Bhd.’).
Where the shares in such companies are fully paid, the shareholders
will have no personal liability. Where shares are only partly paid, the
shareholders will only be liable for the unpaid portion.
7.1.1.2 Companies Limited by Guarantee
Companies limited by guarantee do not have share capital. Hence,
members are only liable to contribute a specified guaranteed amount
where the company’s assets are insufficient to meet its liabilities upon
winding up. These companies are applicable to non-profit making
organisations.
pg. 57
investing in
iskandar

7.1.1.3 Companies Limited by both Shares and Guarantee
The members’/shareholders’ liabilities in such companies are a combination
of those as explained in 7.1.1.1 and 7.1.1.2.
7.1.1.4 Unlimited Companies
These companies do not have share capital (as with companies limited
by guarantee) and there is no limit on the members’ liabilities in the
event of winding up where the company’s assets are inadequate to
meet its liabilities.
7.1.2 Incorporation of a Company
Companies are formed or created through the process of incorporation pursuant
to the Companies Act 1965. A person seeking to set up a company can either
incorporate or register a new company, or acquire a ‘shelf company’.
7.1.2.1 Registration of a New Company
The following steps are required to register a new company:
• An application must be submitted to the Companies Commission
of Malaysia (CCM), using Form 13A, and a payment of RM30 is
required to ascertain whether the intended name for the company
may be used
• If the name is available, the CCM will reserve this for a period of 3
months
• During the 3-month period, the company must lodge its Memorandum,
together with its Articles of Association (if available), Declaration of
Compliance (Form 6) and Statutory Declaration (Form 48A)
• Once the CCM has approved the application, a certificate of
incorporation will be issued and the body corporate will be formed
7.1.2.2 Purchase of a ‘Shelf Company’
A ‘shelf company’ is a company which has already been incorporated for
sale. A shelf company would be dormant and ready for use upon purchase,
subject to approval of a name change. Shelf companies would generally
be incorporated with the minimum authorised capital of RM100,000 and
minimum paid-up capital of RM2. Typically, such companies would also
have the required members/shareholders and directors. The price at which
such companies are sold would generally include the capital registration
fee, and the other costs associated with the incorporation of a company.
Shelf companies can be acquired from many company secretarial or
other professional firms. It should be noted that where a shelf company
is acquired and the name change is approved, the company is entitled to
use the new name. Nevertheless, the former name of the company must
appear beneath its present name on all documents (e.g. business letters,
statements of account, invoices, official notices, cheques, receipts, etc.) for
a period of not less than 12 months from the date of the name change.
7.1.2.3 Who can Incorporate a Company?
The Companies Act 1965 provides that any two or more persons may
incorporate a company by subscribing their names to a Memorandum and
complying with the registration requirements.
There must be at least:
• two natural persons whose principal or only place of residence is in
Malaysia, to be named as first directors in the Memorandum of the
intended company; and
pg. 58
investing in
iskandar

structure
of business
entities
7.2
• one natural person whose principal or only place of residence is
Malaysia, to be appointed as secretary of the intended company
and who must be a qualified and licensed Secretary under the
Companies Act 1965.
7.1.3 Shareholders
The terms ‘shareholder’ and ‘member of a company’ can be used synonymously. A
company can have as few as one shareholder where that shareholder is a corporation.
Otherwise, a company must have at least two members/shareholders.
7.1.3.1 Conditions and Characteristics
The holding of shares in a company represents the rights that the
shareholder has in that company. Essentially, once a shareholder has
contributed money to the company (in the form of equity capital generally),
the money will belong to the company and not to the shareholder. The
shares will constitute property, which can be transferred (subject to the
terms of the Articles of Association of the company).
The shares in turn carry certain rights for the shareholder, such as
distribution rights and voting rights, etc. In general, all shares rank pari
passu, meaning that all shares carry equal rights. However, a company
can issue different classes of shares conferring different rights to the
respective shareholders. The directors of a company will normally have
the power to issue different classes of shares (unless this authority is
excluded in the company’s Articles of Association).
It is recommended (although not a statutory requirement) that the
company’s Articles of Association and/or Memorandum should set out
the different classes of shares which the company can issue, together
with the rights attaching to such shares. In the case of preference
shares, it is a requirement that the rights attaching to such shares be
stipulated in the Articles of Association and/or Memorandum (Section
66 Companies Act 1965).
Preference shares do not confer any voting rights upon the shareholder
but grant the shareholder the right to receive a certain amount upon
distribution (in the form of dividends) or upon redemption when the
company is liquidated or wound up.
Ordinary shares are the most common form of shares. As mentioned
above, these carry certain rights for the shareholders, such as voting
rights, distribution rights and the rights to receive information.
Every shareholder of a company has a right to receive certain information
about the company. Much of this information must be disclosed in the
audited accounts to the CCM, thereby making this publicly available
information to which all shareholders will have access. Additional rights
to information may be available depending on the rights conferred in the
Articles of Association, the class of shares, etc.
7.1.3.2 Number of Shareholders
As highlighted above, a company can have at the minimum 1 corporate
shareholder. If the shareholders are not corporate shareholders, a
minimum of two shareholders is required.
Branches of Foreign Companies
A foreign company desiring to conduct business or establish a place of business in
Malaysia must register with the CCM. Branches are generally permitted to engage in a
wide range of businesses in Malaysia with some exceptions such as the carrying out of
banking services or engaging in the wholesale and retail trade in Malaysia. With respect to
the latter, approval may be sought in limited circumstances from the Ministry of Domestic
Trade and Consumer Affairs.
pg. 59
investing in
iskandar

pg. 60
investing in
iskandar
7.3
7.4
7.5
7.6
Joint Ventures
Businesses can operate in Malaysia through joint ventures, which may either be incorporated
or unincorporated joint ventures. The term ‘joint venture’ does not denote a separate
and distinct business entity. In some instances, subject to terms and contributions, joint
ventures can amount to partnerships for tax purposes.
Sole Proprietorship
All sole proprietorships must be registered with the Registrar of Businesses (under the
auspices of the CCM) under the Registration of Businesses Act 1965.
Partnership
These are business concerns consisting of not less than 2 and not more than 20 partners.
In a partnership, partners are jointly and severally liable for the debts and obligations of the
partnership. Formal partnership deeds may be drawn up setting the rights and obligations
of each partner but this is not obligatory. The registration of partnerships must also be
made with the Registrar of Businesses (under the auspices of the CCM) as required in the
Registration of Businesses Act 1965.
Representative Office/Regional Office
A Representative Office/Regional Office of a foreign company can be established in
Malaysia to perform permissible activities for its headquarters/principal. Such offices
should be totally funded from sources outside Malaysia and are not required to be
incorporated or be registered with the CCM under the Companies Act 1965.
A Representative Office is established to collect investment-related information and
business opportunities in Malaysia. On the other hand, a Regional Office serves as the
coordination centre for its affiliates, subsidiaries and agents within the Asia Pacific region
and is responsible for conducting designated activities within the region it operates.
An approved Representative/Regional Office is allowed to carry out the following activities:
• Planning or coordination of business activities
• Gathering and analysing information or undertaking feasibility studies on investment
and business opportunities in Malaysia and the region
• Identifying sources of raw materials, components or other industrial products
• Undertaking research and product development
• Acting as a coordination centre for the corporation’s affiliates, subsidiaries and agents
in the region
However, an approved Representative/Regional Office is not allowed to carry out the
following activities:
• Engage in any trading (including import and export), business or any form of commercial
activity
• Lease warehousing facilities. Any shipment/transshipment or storage of goods must
be carried out through a local agent or distributor
• Conclude business contracts on behalf of the foreign corporation or provide services
for a fee
• Participate in the daily management of any of its subsidiaries, affiliates or branches in
Malaysia
• Conduct any business transaction or derive income from its operations
Applications for the establishment of Representative/Regional Offices should be
submitted to the Malaysian Industrial Development Authority (MIDA). The approval for the
establishment of Representative/Regional Offices and employment of expatriates is valid
for a period of 2 years and is renewable.

Chapter 8
Financing Reporting
and Audit Requirements
8.1 Accounting standards
8.2 Audit requirements
8.3 Record Keeping
8
investing in
iskandar

all companies comply with approved accounting standards
to achieve greater transparency

Chapter 8
Financing Reporting and Audit
Requirements
financing
reporting
and audit
requirements
Accounting and Audit Regulations
The Companies Act 1965 includes stringent provisions relating to:
• the maintenance and retention of accounting records
• the maintenance of registers and minutes relating to directors and shareholders and
their meetings
• the form and content of annual accounts
• the publication to shareholders and public filing of annual accounts
• the requirements for annual accounts to be audited
• the penal provisions for incorrect or unsatisfactory annual accounts
There are no regulations directly governing the accounting practices of unincorporated
businesses such as sole proprietorships and partnerships. However, such unincorporated
businesses would have to comply with the Income Tax Ruling 4/2000 as mentioned below.
8.1
Accounting standards
Approved accounting standards are issued by the Malaysian Accounting Standards Board
(MASB). The Companies Act 1965 requires that accounts be prepared in accordance with
approved accounting standards.
For entities other than private entities, the approved accounting standards issued by
the MASB are referred to as Financial Reporting Standards (FRS) which accord with
internationally-approved accounting standards. Private entities are subject to Private
Entity Reporting Standards (PERS) which are generally less stringent. Private entities may
choose to apply FRS as well.
A private entity is a private company incorporated under the Companies Act 1965 that:
a) is not itself required to prepare or lodge any financial statements under any law
administered by the Securities Commission (SC) or Bank Negara Malaysia (BNM); and
b) is not a subsidiary or associate of, or jointly controlled by, any entity outlined in (a)
above.
8.2
Audit requirements
Every company is required to prepare a set of accounts (showing the company’s profit and
loss statement and balance sheet), which must be duly audited by independent auditors.
The audited accounts must be presented at the company’s Annual General Meeting
(AGM) within 18 months of the date of incorporation and thereafter at least once every
calendar year.
The intervals between the presentation of the accounts must not be more than 15 months
apart and the accounts must be made up to a date not more than 6 months before the date
of the AGM. In this connection, the AGM must be held within 6 months of the company’s
financial year-end.
pg. 63
investing in
iskandar

The audited accounts must be filed with the Companies Commission of Malaysia (CCM)
together with an annual return and directors’ report within 1 month of the company’s
AGM. It should be noted that ‘exempt private companies’ are not required to submit their
profit and loss account and balance sheet together with their annual returns, although
the relevant accounting standards continue to apply to such entities. ‘Exempt private
companies’ are those which do not have any corporate members/shareholders and have
no more than 20 members/shareholders.
The Companies Act 1965 imposes a statutory requirement on all companies to appoint
independent external auditors who should be qualified and approved. For a new company,
the directors or shareholders (depending on the Articles of Association) are responsible
for appointing an auditor before the first AGM. The appointment of an independent auditor
will last until the next AGM whereupon the auditor may be reappointed or asked to resign
and new auditors will be appointed.
8.3
Record Keeping
The Companies Act 1965 requires each company to retain accounting and other records
in connection with their transactions and financial position for a period of 7 years after
the completion of the transactions or operations to which they respectively relate. The
records must be kept either at the registered office of the company or at such other place
in Malaysia.
The company may keep its accounting and other records pertaining to its operations
outside Malaysia at a place outside Malaysia. However, such records must be produced in
Malaysia if requested by the CCM.
Aside from the requirements of the Companies Act 1965, the Income Tax Act 1967 also
imposes an obligation on taxpayers to keep appropriate books and records. Under the
Public Ruling 4/2000 issued by the Inland Revenue Board (IRB), all companies must keep
records and books of accounts including a cash book, sales ledger, purchase ledger and
a general ledger.
For tax purposes, the appropriate records must be maintained for 7 years from the end of
the year to which any income from the business or operations relates. The books should
also be written up at regular intervals. Appropriate entries for each transaction should be
recorded as soon as possible (in any case not later than 60 days after the transaction).
Supporting documents such as invoices, bank statements, pay-in slips, cheque butts,
receipts for payments, payroll records and copies of receipts issued should also be
retained. Receipts issued should be serially numbered. All companies must ensure that
the appropriate records are available in the event of a tax audit/investigation.
pg. 64
investing in
iskandar

Chapter 9
Intellectual Property
9.1 Patents
9.2 Copyright
9.3 TradeMarks
9.4 Industrial Designs
9.5 Layout Designs of Integrated Circuits
9
investing in
iskandar

usinesses enjoy intellectual property protection in malaysia

intellectual
property
Chapter 9
Intellectual Property
Intellectual Property Protection
The Malaysian intellectual property laws afford protection via an extensive statutory scheme
covering intellectual property rights. This includes copyright, trademarks, designs, patents
and layout designs of integrated circuits in compliance with Malaysia’s obligation as a
signatory to the Agreement on Trade Related Aspects of Intellectual Property (TRIPS).
Malaysia has acceded to the World Intellectual Property Organisation, the Paris Convention
for the Protection of Industrial Property, the Berne Convention for the Protection of Literary
and Artistic Works, as well as the Patent Cooperation Treaty (PCT).
The Intellectual Property Corporation of Malaysia (MIPC) is a statutory body established to,
among others, generally assist in the administration and enforcement of intellectual property
laws and issues or matters relating to intellectual property in conformance with international
standards and provide adequate protection to both local and foreign investors.
9.1
Patents
Patent law in Malaysia is governed by the Patents Act 1983 and the Patent Regulations
1986. The owner of a patent has the exclusive rights, in relation to the patent, to exploit
the patented invention, assign or transmit the patent, or to conclude licensee contracts.
Anyone seeking to deal with the patent where the rights are exclusive to the owner will
need to get prior consent from the latter.
The accession by Malaysia to the Patent Cooperation Treaty (PCT) means that Malaysia is
a designated country in respect of a patent application filed in another contracting state on
or after 16 August 2006. Malaysia will also be automatically designated for a request for
international preliminary examination as regards an application filed in another contracting
state. Malaysian applicants themselves will be able to elect for PCT applications where the
same treatment will be accorded to them as with applicants from contracting states.
9.2
Copyright
Malaysia has an extensive statutory scheme for the protection of work under copyright.
The Copyright Act 1987 and its regulations govern the law on copyright in Malaysia.
Malaysia acceded to the Berne Convention on 1 October 1990.
The types of works protected by copyright in Malaysia are literary, musical and artistic
works, films, sound recordings and broadcasts. Derivative works are also protected.
The owner of the copyright in a literary, musical or artistic work, film, sound recording or
derivative work has the exclusive right to control certain acts in these works, including
reproduction and communication, performance or distribution to the public, either in its
original or derivative form.
Copyright protection in literary, musical or artistic works is for the duration of the life of the
author plus 50 years after death. There is no requirement for registration. Civil remedies
are available to a copyright owner whose copyright is infringed. Malaysia also imposes
criminal penalties for violations of its copyright laws.
A special team of officers from the Ministry of Domestic Trade and Consumer Affairs
is appointed to enforce the Act. They are empowered to enter premises suspected of
having infringing copies, search and seize infringing copies and contrivances; and arrest
without warrant.
pg. 67
investing in
iskandar

9.3
Trademarks
Trademarks are accorded protection both under common law and by registration pursuant
to the Trade Marks Act 1976 and Trade Marks Regulations 1997. Trademarks which are
either pending registration, or for which no application for registration have been made,
are protected under the common law, provided the owner of such unregistered marks
can show proof of goodwill and reputation in the use of the said marks in relation to
goods or services.
The registration of a trademark will be for a period of 10 years but may be renewed from
time to time in perpetuity. Upon registration of a trademark, the proprietor has the exclusive
right to use the trademark in relation to those goods or services subject to any conditions,
amendments, modifications or limitations entered in the Register of Trade Marks. The
Register of Trade Marks is kept at the Central Trade Marks Office.
In accordance with TRIPS, Malaysia prohibits the registration of well-known trademarks by
unauthorised persons and provides for border measures to prohibit counterfeit trademarks
from being imported into Malaysia.
9.4
Industrial Designs
The Industrial Designs Act 1996 and Industrial Designs Regulations 1999 apply to
applications for the registration of industrial designs made after 1 September 1999. The
owner of a registered industrial design will have the exclusive right to make or import
for sale or hire, or for use for the purposes of any trade or business, or to sell, hire or to
offer or expose for sale or hire, any article to which the registered industrial design has
been applied.
Once registered, the rights associated with an industrial design will be that of a personal
property in that it will be capable of assignment and transmission by operation of law.
Registered designs are protected for an initial period of 5 years which may be extended to
a further two 5-year terms, resulting in a total period of 15 years.
9.5
Layout Designs of Integrated Circuits
The Layout Designs of Integrated Circuits Act 2000 (LDIC) provides for the protection of
layout designs of integrated circuits based on originality, the creator’s own invention and
the fact that the creation is freely created. There is no registration for the layout design of
an integrated circuit.
The LDIC automatically grants the owner of an original circuit layout certain rights to copy
the layout, make an integrated circuit in accordance with the layout and exploit the layout
commercially. The rights can be transferred either partly or wholly by way of assignment,
license, wills or through the enforcement of law. The duration of protection is 10 years
from the date of commercial exploitation or 15 years from the date of creation if not
commercially exploited.
The Act is implemented in compliance with the TRIPS agreement to provide a guarantee
to investors in Malaysia’s electronics industry and ensure the growth of technology in
the country.
pg. 68
investing in
iskandar

Chapter 10
Taxation
10.1 Tax Administration
10.1.1 Self-Assessment System
10.1.2 Payment of Tax
10.1.2.1 Companies
10.1.2.2 Individuals
10.1.2.2.1 Employment
10.1.2.2.2 Self-Employment/
Sole Proprietors
10.1.3 Public Rulings
10.2 Direct Taxes
10.2.1 Companies
10.2.1.1 Scope of Taxation
10.2.1.2 Corporate Tax Residence
10.2.1.3 Rate of Tax
10.2.1.4 Tax computation
10.2.1.4.1 Source basis
10.2.1.4.2 Deductible
Expenditure
10.2.1.4.3 Capital
Allowances
10.2.1.4.4 Tax Losses
10.2.1.4.5 Tax Incentives
10.2.1.4.6 Transfer Pricing
10.2.2 Individuals
10.2.2.1 Scope of
taxation
10.2.2.2 Residence
10.2.2.3 Tax Rates
10.2.2.4 Personal Reliefs
10.2.3 withholding tax
10.3 Capital Taxes and Transfer
Taxes
10.4 Indirect Taxes
10.4.1 Value Added Tax
(VAT)/Goods and
Services Tax (GST)
10.4.2 Sales Tax
10.4.3 Service Tax
10.4.4 Customs Duty
10.4.5 Excise Duty
10
investing in
iskandar

Malaysia offers a comprehensive range of tax incentives

taxation
Chapter 10
Taxation
Overview of the Tax scheme in Malaysia
10.1
Tax Administration
10.1.1 Self-assessment System
Malaysia operates a self-assessment basis of taxation. This means that returns
filed by taxpayers are deemed to be their assessments. The onus is therefore on
the taxpayer to ensure that the return is correctly filed. To enforce this, the Inland
Revenue Board (IRB) will carry out tax audits on taxpayers to ensure compliance
with the tax laws. The IRB also has the powers to carry out tax investigations,
which would occur where an element of fraud is suspected.
10.1.2 Payment of Tax
Taxpayers are required to pay their taxes in advance of their assessments. The
following sets out the manner in which tax payments are made for different
categories of taxpayers:
10.1.2.1 Companies
A company is required to notify the IRB of its estimated tax liability not
later than 30 days before the start of its financial year. For example, a
company with a financial year from 1 January to 31 December must
notify the IRB of its estimated chargeable income for the financial year
ended 31 December 2008 by 1 December 2007. It should be noted that
the tax estimate must be at least 85% of the prior year’s estimate or
revised estimate.
Companies are entitled to revise their tax estimates in the 6 th and/or 9 th
month of their financial years. Where a company’s actual tax liability (as
per the assessment) is greater than the estimate or revised estimate by
more than 30%, the difference in excess of the 30% will be subject to
a penalty of 10%. Therefore, it is important to ensure that tax estimates
are accurately computed.
Once an estimate has been furnished, the estimated tax will be payable
in 12 equal monthly instalments, commencing from the 2 nd month of
the financial year. The tax is due by the 10 th date of each month. Late
payments will be subject to a penalty of 10%.
Where a company is new and is about to commence business, the
estimate of tax payable for its first year of operations must be submitted
within 3 months from the date of commencement of operations. The
instalments will become payable commencing from the 6 th month of
the financial year.
10.1.2.2 Individuals
Individuals who arrive in Malaysia and who will be chargeable to tax are
required to notify the IRB of their chargeability to tax within 2 months
of their arrival. Where an employer commences to employ an individual
who is or is likely to be chargeable to tax in respect of income from the
employment, the employer is required to notify the IRB within 1 month
thereafter, stating the full name and address of the individual and the
terms and date of commencement of the employment.
pg. 71
investing in
iskandar

10.1.2.2.1 Employment
For employees, taxes are collected from their payroll
through a Schedular Tax Deduction Scheme (STD) which
employers are obliged to administer. Employers are
required to deduct the relevant STD payments from the
employees’ salaries each month and pay this amount to
the IRB.
10.1.2.2.2 Self-employment/Sole Proprietors
An individual who is self-employed is also required to pay
tax by instalments based on an instalment scheme which
will be issued by the IRB.
10.1.3 Public Rulings
To assist taxpayers in understanding their compliance obligations and to provide
an indication of the IRB’s interpretation of the tax laws, the IRB has issued Public
Rulings on several areas. Public Rulings do not carry statutory force but are useful
in a self-assessment environment to provide guidance to taxpayers. Taxpayers are
advised to read the Public Rulings which can be found at the IRB’s website: www.
hasilnet.org.my.
10.2
Direct Taxes
10.2.1 Companies
10.2.1.1 Scope of Taxation
Both resident and non-resident companies are taxed on a territorial
basis, i.e. on income accruing in or derived from Malaysia. Foreignsourced
income received in Malaysia is tax exempt. However, resident
companies engaged in the business of banking, insurance, shipping
and air transport are taxable on their worldwide income.
10.2.1.2 Corporate Tax Residence
A company is tax resident in Malaysia where the control and
management of the business or businesses of the company are
exercised in Malaysia. Such control and management is determined
through the place where the Board of Directors’ meetings are held.
Not all board meetings need to be held in Malaysia. At least one such
meeting where important corporate decisions are made would be
sufficient to render the company a resident.
10.2.1.3 Rate of Tax
The rate of corporate income tax in Malaysia is 27% for the year of
assessment 2007 (i.e. for financial year ended in 2007) and will be
reduced to 26% for the year of assessment 2008. It has been proposed
in the 2008 Budget that the corporate tax rate will be further reduced to
25% for the year of assessment 2009.
However, resident companies with a paid-up share capital (comprising
ordinary shares) of RM2.5 million or less are subject to tax at a rate
of 20% on the first RM500,000 of chargeable income. The remainder
chargeable income is subject to the prevailing corporate tax rate.
Companies enjoying tax incentives will be exempt on a percentage
or all of their income depending on the incentive granted to
the company (refer to 10.6 below for tax incentives available to
companies in Iskandar).
pg. 72
investing in
iskandar

taxation
10.2.1.4 Tax Computation
10.2.1.4.1 Source basis
A company can have more than one business source of
income as well as investment sources of income (e.g.
interest, dividends, rental, etc.). Income from each type
of business source or activity is taxed separately as is
each source of investment income.
Investment income is treated as passive income and only
expenses directly incurred in earning such income will be
deductible for tax purposes.
10.2.1.4.2 Deductible Expenditure
Expenses are deductible for tax purposes where these
are revenue in nature and are ‘wholly and exclusively
incurred in the production of gross income’. This would
typically include salaries, costs of running an office and
overheads, maintenance costs, etc.
The question of whether an expense is revenue or capital
in nature (in which case it would not be tax deductible)
is based on various factors including whether or not the
expense secures an enduring benefit, whether it is one-off
or recurrent, etc. The following sets out the tax treatment
of expenses commonly charged by businesses:
• Accounting depreciation is not deductible for tax
purposes but capital allowances (or tax depreciation)
can be claimed instead on qualifying capital
expenditure (refer to 10.2.1.4.3 below)
• Bad debts and provisions for bad debts may be
deductible if these are reasonably expected in all the
circumstances to be unrecoverable. An analysis of the
debt would need to be undertaken and documented
• Entertainment expenses only enjoy a 50% deduction
although in certain instances, a 100% deduction is
available (e.g. staff entertainment)
• The costs of leave passages provided to employees
are generally not deductible, except where the leave
passage is a yearly leave passage within Malaysia
involving the employer, employee and immediate
family members of the employee
• Finance expenses (e.g. interest) are deductible
against business income where the funds (on
which the interest costs are incurred) are utilised
for business purposes or on assets used or held for
business purposes.
Where interest costs are incurred on funds used for
investment purposes, the interest costs will only
be deductible against investment income and not
against the business income. The deductibility of
other finance costs such as guarantee fees, etc. will
depend on the facts of each case.
Where the costs are viewed as costs incurred in
securing finance rather than in maintaining finance
facilities, these costs are capital in nature and are not
deductible. There are no thin capitalisation rules in
Malaysia at present.
pg. 73
investing in
iskandar

Based on deductibility rules, taxable profits and accounting
profits will not be the same. The accounting profits need to
be adjusted for tax purposes to arrive at taxable profits.
Accounting profits, after adjusting for disallowable
expenditure and non-taxable income are referred to as
‘adjusted income’ for tax purposes. This is computed on
a ‘source by source’ basis, i.e. each business source is
computed separately. Where this results in an adjusted
loss, the loss can be relieved against other sources of
income (refer to 10.2.1.4.4 below).
10.2.1.4.3 Capital Allowances
Capital expenses are not deductible. However, capital
allowances are available on capital expenditure incurred
on plant and machinery (i.e. qualifying assets) used for the
purposes of the business.
An initial allowance of 20% (in the first year) and an annual
allowance ranging from 10% to 20% (in the first year and
thereafter) can be claimed until the relevant assets have a
nil tax residual value (or tax written down value).
Capital allowances are computed on a ‘straight line’ basis
based on the cost of the asset. The allowances are deducted
against the adjusted income from a business source.
Capital allowances in respect of a qualifying asset used in
a specific business source can only be deducted against
the income generated from that business source. Capital
allowances are claimed against adjusted business income
from a source to arrive at statutory income from that
source.
Where assets are sold within a 2-year period, the
allowances claimed to date may be withdrawn (unless
there was a proper commercial rationale for the disposal).
Balancing allowances and charges are also computed on
the sale of assets upon which capital allowances have
been claimed.
A balancing allowance arises where the sales proceeds are
less than the tax written down value of the asset. Balancing
allowances are deductible. Where the sales proceeds are
greater than the tax written down value of the asset, a
balancing charge will arise and this is taxable.
Unabsorbed or unutilised capital allowances can only be
carried forward and set off against income of the same
business source. This is provided the shareholders of the
company on the first day of the year of assessment (in
which the allowances are being utilised) are substantially
the same as the shareholders on the last day of the period
in which the unabsorbed capital allowances arose.
pg. 74
investing in
iskandar

taxation
Therefore, if there is a substantial change in the company’s
shareholding, the unabsorbed capital allowances will be
lost. The shareholders of a company will be viewed as
substantially the same if on both the relevant dates, more
than 50% of the paid-up capital (ordinary share) is held by,
or on behalf of the same persons.
10.2.1.4.4 Tax Losses
Where an adjusted loss arises, this can be utilised in the
following ways:
• Current year’s adjusted business losses may be set
off against any income source for that year
• 50% of the remaining adjusted loss may then be
surrendered to a group company for group relief,
which is discussed in more detail below. The
remaining unabsorbed losses can be carried forward
subject to the criteria outlined below
• Unabsorbed losses carried forward can only be
utilised to set off business sources of income (which
need not be the same business source)
• As with unabsorbed capital allowances, unabsorbed
business losses can be carried forward and deducted
in future years. This is provided the shareholders on
the first day of the year of assessment (in which the
losses are utilised) are substantially the same as the
shareholders on the last day of the period in which
the losses arose
• Currently, there are no provisions for ‘loss carry back’
in Malaysia
• As mentioned above, group relief is available in certain
circumstances. 50% of the current year adjusted loss
of a company will be available for set-off against the
total income of another company within the same
group subject to the following conditions:
- Both the claimant and surrendering company
must have a paid-up capital (in respect of ordinary
shares) of more than RM2.5 million;
- Both the claimant and surrendering company
must have the same accounting period;
- The shareholding in both the claimant and
surrendering company whether direct or indirect
must not be less than 70%; and
- The 70% shareholding must be on a continuous
basis during the relevant year and immediate
preceding year.
pg. 75
investing in
iskandar

10.2.2 Individuals
However, group relief will not be available for companies
which enjoy certain incentives (e.g. pioneer status,
investment tax allowance, reinvestment allowance, etc.).
Therefore, group relief is not available for companies
enjoying tax incentives in Iskandar.
10.2.1.4.5 Tax Incentives
Malaysia offers a comprehensive range of tax incentives
to attract foreign investments and promote exports and
investment in targeted sectors. Basically, tax incentives
available to approved activities, sectors or industries
are pioneer status (i.e. tax holiday) or investment tax
allowance.
In addition, tax incentives currently available include
reinvestment allowance, investment allowance,
double deductions for certain expenditure (e.g. R&D
and promotion of exports), tax exemption for Islamic
businesses and special tax treatment for venture capital
companies.
10.2.1.4.6 Transfer Pricing
There is a set of transfer pricing guidelines issued by the
IRB which is aimed at providing taxpayers with guidance
on domestic legislation, acceptable methodologies
in determining arm’s length prices as well as types of
documentation and records to be maintained for related
party transactions.
The guidelines are mainly based on the ‘arm’s length’
principle as set out under the Organisation for Economic
Co-operation and Development (OECD) Transfer Pricing
Guidelines. Transfer pricing is enforced through the antiavoidance
provisions in the Income Tax Act 1967 (ITA).
10.2.2.1 Scope of Taxation
All individuals are taxed on income accruing in or derived from
Malaysia. Foreign-sourced income received by an individual is exempt
from tax. Employment income and certain benefits in kind arising
from employment are taxable.
The value at which the benefits in kind are taxable are set out in
several Public Rulings issued by the IRB. Self-employed individuals/
sole proprietors carrying on business activities are subject to the
same rules with regard to computation of income for companies as
set out above.
For non-residents, their employment income is exempt from tax in
Malaysia if the period of employment exercised in Malaysia is for
a period/periods which in aggregate, do not exceed 60 days in a
calendar year. Tax exemption is also available under the relevant tax
treaty if pre-requisite conditions are met.
pg. 76
investing in
iskandar

taxation
10.2.2.2 Residence
The test for residence status for individuals is set out in Section 7
of the ITA. There are essentially four tests under which an individual
would be regarded as tax resident. In each of these tests, the number
of days of physical presence in Malaysia is relevant. For this purpose,
presence in Malaysia for part of a day is considered as presence for a
full day.
The four tests are as follows:
a) The individual is in Malaysia for at least 182 days in the calendar
year
b) The individual is in Malaysia for less than 182 days in the
calendar year (the period of less than 182 days being referred
to as the ‘shorter period’) and that period is linked by; or to
another period of 182 or more consecutive days (referred to as
the ‘longer period’) throughout which he is in Malaysia in the
adjoining year. However, any temporary absence from Malaysia
of the following nature is regarded as forming part of the shorter
and longer periods:
i) Absence connected with his service in Malaysia and owing
to service matters or attending conferences or seminars or
study abroad;
ii)
Absence owing to ill-health involving himself or any
immediate member of the family; and
iii) Absence in respect of social visits not exceeding a total of 14
days;
provided that he is in Malaysia immediately before and after the
temporary absence
c) The individual is in Malaysia for 90 days or more during the year
and was either in Malaysia for at least 90 days; or was a resident
in any 3 of the 4 immediately preceding calendar years
d) The individual is a resident for the calendar year following the
year in question and was a resident for each of the 3 immediately
preceding years
10.2.2.3 Tax Rates
Resident individuals are taxed at scale rates ranging from 0% (for the
first chargeable income of RM2,500) to 28% (for chargeable income
exceeding RM250,000). Non-residents are taxed at a flat rate of 28%.
pg. 77
investing in
iskandar

10.2.2.4 Personal Reliefs
Resident individuals may claim various personal reliefs which will
effectively reduce their chargeable income. These include the following:
Types of Reliefs
rM
Self 8,000
Disabled individual (additional) 6,000
Spouse (for joint assessments) 3,000
Children (depending on age and education) 1,000 – 4,000
Life insurance/contributions to the EPF 6,000
Medical/education insurance 3,000
Medical expenses for parents 5,000
Costs of books, magazines, etc. 1,000
Purchase of personal computer (once every 3 years) 3,000
10.2.3 Withholding Tax
Payments made to non-residents in respect of interest, royalties, fees for
services performed in Malaysia (for both technical and non-technical services,
other than routine day-to-day administrative services between a parent and
subsidiary or head office and branch) and rental payments for movable property
will attract withholding tax. In addition, contract payments to non-residents for
contract projects undertaken in Malaysia are also subject to withholding tax.
However, the tax withheld is an advance tax payable on account of the corporate
tax liability of the non-resident.
The rates of withholding tax are as follows:
• Interest - 15% on the gross payment
• Royalties - 10% on the gross payment
• Service fees - 10% on the gross payment
• Rental for movable property - 10% on the gross payment
• Contract projects - 13% on the gross payment (i.e. 10% on account of the
non-resident’s taxes and 3% on account of the employees’ taxes)
The payer is obliged to withhold the tax and remit the tax to the IRB within
1 month from the date of payment or crediting of the payment to the nonresident.
Non-compliance with this provision will result in a penalty of 10% of
the withholding tax imposed. Where the tax and penalty remain unpaid, the
payer will be denied a tax deduction for the expense.
Double tax agreements may provide reduced rates of withholding tax. IDRstatus
companies, approved developers and approved development managers
are exempted from compliance with the withholding tax provisions in respect of
certain payments made to non-residents (refer to Chapter 12).
pg. 78
investing in
iskandar

taxation
10.3
Capital Taxes and Transfer Taxes
There is no capital gains tax in Malaysia. Real Property Gains Tax (RPGT) which used
to apply on chargeable gains arising from the disposal of real property or shares in real
property companies is now exempt. Exemption from RPGT took effect from 1 April 2007
in respect of gains arising from the disposals of real property after 31 March 2007.
Stamp duty is imposed on instruments of transfer giving rise to the transfer of property.
The rates of stamp duty vary depending on the property concerned. For the transfer of
property (excluding shares), stamp duty is computed on an ad valorem basis, ranging
from 1% to 3%. Where shares are transferred, stamp duty is charged at the rate of 0.3%
of the market value of the shares transferred or the transfer consideration, whichever is
greater on the date of transfer.
10.4
Indirect Taxes
Indirect taxes are imposed in the ‘Principal Customs Area’ (PCA) which covers all of
Malaysia with the exception of the islands of Labuan, Langkawi, Tioman and various
designated areas and zones (pursuant to the Free Zones Act 1990) within the PCA.
Iskandar as a whole, is not designated as a free zone. However, there are several areas
within Iskandar which have been accorded free zone status.
There are several indirect taxes in Malaysia which are explained briefly below.
10.4.1 Value Added Tax (VAT)/Goods and Services Tax (GST)
Presently, Malaysia does not operate a VAT/GST system. A GST system has
been proposed but the implementation date for this has yet to be announced.
10.4.2 Sales Tax
Sales tax is a single stage tax which is generally levied on:
• imported goods at the time of importation; and
• locally-manufactured goods at the time the goods are sold or otherwise
disposed of by the manufacturer.
The standard sales tax rate is 10% whilst certain non-essential goods are subject
to 5% sales tax. However, certain goods are not subject to sales tax including:
• locally-manufactured taxable goods which are directly exported
• goods which are temporarily imported into Malaysia and subsequently reexported
or goods which are temporarily exported (e.g. for repairs) and
subsequently re-imported into Malaysia
• goods which are sold to free zones and bonded warehouses
• importation of raw materials, components and packaging materials used in
the manufacture of taxable goods
pg. 79
investing in
iskandar

Any person who is engaged in the manufacture of taxable goods with an annual
sales value in excess of RM100,000, is required to apply for a sales tax licence
under the Sales Tax Act 1972 (STA). Where the taxable goods are sold in the
domestic market, the licensed manufacturer is required to impose, collect and
pay the sales tax to the Customs Department. The submission of the sales tax
return must be done once every two months together with the payment of sales
tax, if any.
A sales tax licence is not required for several activities including the following:
• Developing and printing of photographs and the production of film slides
• Manufacture of ready-made concrete
• Preparation of tarred metal, tarred screenings and hot-mixed preparations
of bitumen and metal for road-making
• Repacking of bulk goods into smaller packages by a person other than a
licensed manufacturer
• Repair of second-hand or used goods
• Installation of air conditioners in motor vehicles
However, manufacturers undertaking such activities are required to apply for a
certificate of exemption from licensing.
10.4.3 Service Tax
Service tax is imposed on taxable services (which includes the sale of food, drinks
and tobacco products) provided by a taxable person pursuant to the Service Tax
Act 1975. The rate of service tax is 5%. Where no charge is imposed on the
provision of taxable services (and goods), an arm’s length value is imputed upon
which service tax is payable.
Service tax is not imposed in respect of exported services (where the services
are in connection with goods or land situated outside Malaysia).
Service tax is imposed in respect of taxable services provided by taxable persons
subject to an annual sales turnover of RM150,000 or RM300,000 depending on
the type of service involved. The following are examples of taxable services:
a) accounting, auditing, bookkeeping, consultancy or other professional
services
b) legal services including consultancy services on legal matters
c) engineering consultancy or other professional services
d) architectural services including professional consultancy services
e) surveying services including valuation, appraisal, estate agency or professional
consultancy services
f) consultancy services (excluding medical and surgical treatment provided by
private clinics or specialist clinics)
g) management services including project management or project coordination
h) provision of lodging or sleeping accommodation, sale of food/drinks /tobacco
products, health and massage services and other hotel-related services
i) parking spaces for motor vehicles where parking charges are imposed
pg. 80
investing in
iskandar

taxation
j) advertising services
k) telecommunication services
l) provision of services for clearing of goods from customs’ control
m) provision of courier delivery services for documents or parcels not exceeding
30 kilograms
n) general servicing, engine repairs and tuning, changing, adjusting and fixing of
parts, wheel balancing, wheel alignment or body repairs including knocking,
welding or repainting of motor vehicles
o) provision of veterinary services
Certain intra-group services are exempt from service tax.
Every taxable person who carries on a business of providing taxable service
(where the annual sales turnover for the provision of taxable service exceeds
the prescribed threshold) is required to apply for a service tax licence under the
Service Tax Act 1975. Service tax is charged when the invoice for the provision of
taxable services is issued.
Service tax returns are required to be submitted once every two months to the
Customs Department together with the payment of service tax received from the
customers. In the event the licensee does not receive payment from its customers,
service tax is nonetheless payable to the Customs Department after a 12-month
period from the date of issuance of the invoice.
In the 2008 Budget, it has been proposed that the licensing threshold of RM150,000
for professional, consultancy and management services will be abolished with
effect from 1 January 2008.
10.4.4 Customs Duty
Customs duties are levied on goods imported into or exported from Malaysia.
The amount of duty is dependent on the classification of goods as set out in
the Harmonised Commodity Description and Coding System. Being a member
of the World Trade Organisation (WTO), Malaysia uses the WTO Customs
Valuation Code as the basis of valuation for customs purposes. Basically, the
transaction value is used as the basis of valuation for import duty purposes (as
well as for sales tax – refer to 10.4.2 above) for imported goods.
Preferential rates of import duties may be available in relation to goods
manufactured within the Association of Southeast Asian Nations (ASEAN)
member countries and in countries with which Malaysia has entered into
bilateral Free Trade Agreements.
The Customs Act 1967 allows for certain exemptions/reliefs for certain sectors
involving manufacturing, warehousing and trading, amongst others, including
the following:
• subject to various conditions, exemptions from import duties are generally
available for raw materials and components used in the manufacture of
goods for export
• exemptions from import duties may be available for machinery and
equipment that are not available in Malaysia but are imported for use directly
in manufacturing processes
• import duties are not payable within bonded warehouses for the storage of
dutiable goods and in free zones, etc.
pg. 81
investing in
iskandar

10.4.5 Excise Duty
Excise duty is levied on a limited range of goods (locally-manufactured or
imported). These include:
• passenger motor vehicles
• motor cycles
• alcoholic beverages
• cigarettes
Excise duty may be computed on an ad valorem basis or using specific rates
depending on the goods in question. Before such goods can be removed from
the relevant manufacturing premises or upon clearance from customs’ control,
the excise duty must be paid.
As with other indirect taxes mentioned above, there are certain exemptions/
reliefs from excise duty.
Businesses located outside the PCA (e.g. in free zones) are not subject to the
above indirect taxes.
pg. 82
investing in
iskandar

Chapter 11
Immigration and
Employment Matters
11.1 Immigration Requirements
11.1.1 Visas
11.1.2 Employment Passes
11.1.3 Policy regarding Employment of Expatriate Personnel
11.1.4 Application for Expatriate Posts
11.1.5 Employment of Foreign Workers
11.1.6 special categories of employment passes
11.2 Legal Requirements under the Employment Act 1955
11.3 Employees Provident Fund (EPF)
11.4 Social Security Organisation (SOCSO)
11
investing in
iskandar

malaysia’s thriving economy offers a stable working environment with
ample opportunities in most areas of expertise

Chapter 11
Immigration and Employment Matters
immigration
and
employment
matters
Working in Malaysia
There are various regulations in Malaysia which govern the employment of foreign nationals
as well as Malaysians. These include immigration requirements, the requirements of
the Employment Act 1955, contributions to the Employees Provident Fund (EPF) and
contributions to the Social Security Organisation (SOCSO) as set out below.
11.1
Immigration Requirements
11.1.1 Visas
Every person entering Malaysia is required to have a valid national Passport or
internationally-recognised Travel Document which must be recognised by the
Immigration Department for entry into Malaysia. Additionally, depending on the
individual’s nationality, a visa may be required prior to arrival/entry into Malaysia.
Visas can generally be obtained at the Malaysian Embassy/Consulate in the
respective country of nationality of the individual.
The following table sets out the visa requirements for nationals of the countries
listed below:
Visa Requirements
No visa required
No visa required for visit not
exceeding three (3) months
No visa required for visit not
exceeding two (2) weeks
Visa required
(prior to entry)
Prior approval required
from the Malaysian Government
Citizens/Nationals of:
Commonwealth countries (except India, Bangladesh,
Pakistan, Sri Lanka, Cameroon, Mozambique and Nigeria),
ASEAN countries, Switzerland, Netherlands, San Marino
and Liechtenstein
Algeria, Argentina, Austria, Bahrain, Belgium,
Bosnia-Herzegovina, Brazil, Croatia, Cuba, Czech Republic,
Denmark, Egypt, Finland, France, Germany, Hungary,
Iceland, Italy, Japan, Jordan, Kyrgyz Republic, Kuwait,
Lebanon, Luxembourg, Norway, Oman, Poland, Qatar,
Romania, Saudi Arabia, South Korea, Sweden, Slovakia,
Tunisia, Turkey, Turkmenistan, United Arab Emirates,
United States of America, Uruguay and Yemen
Iran, Iraq, Libya and Syria
Afghanistan, India, Bangladesh, Pakistan, Sri Lanka,
Bhutan, China, Myanmar, Nepal, Taiwan, Angola, Burkina
Faso, Burundi, Cameroon, Cape Verde, Central African
Republic, Chad, Comoros, Congo Republic, Congo
Democratic Republic, Cote d’ Ivoire, Djibouti, Equatorial
Guinea, Eritrea, Ethiopia, Guinea Republic, Guinea-Bissau,
Liberia, Madagascar, Mali, Mauritania, Mozambique, Niger,
Rwanda, Senegal and Nigeria
Israel, Serbia and Montenegro
Upon entry into Malaysia, the Passport/Travel Document will need to be endorsed
with one of the following types of passes.
pg. 85
investing in
iskandar

• Visit Pass (Social)
Visit passes (social) are issued mainly to tourists and are solely for the
purpose of a social visit. A person holding a social visit pass cannot take up
employment, business or professional work while in Malaysia.
• Visit Pass (Business)
Business visit passes are generally issued to the following categories of
entrants:
- Owners of businesses (in Malaysia) and their representatives entering
Malaysia to attend to company matters;
- Investors or businessmen entering to explore business opportunities and
investment potential;
- Foreign representatives of companies entering to introduce goods
for manufacture in Malaysia, but not to engage in direct selling or
distribution;
- Property owners entering to negotiate, sell or lease properties;
- Foreign reporters from mass media agencies entering to cover any event
in Malaysia; or
- Participants in sporting events.
Business passes cannot be used for employment or for supervising the
installation of new machinery or the construction of a factory.
• Conversion of Passes
Foreign visitors who have entered Malaysia on social visit passes may apply
to convert these into business visit passes. Such applications should be
made to the Immigration Department. Applicants wishing to undertake
manufacturing activities can convert their passes through the Immigration
Department with a letter of recommendation from Malaysian Industrial
Development Authority (MIDA).
11.1.2 Employment Passes
There are several types of employment passes available to non-Malaysians.
These are:
• Visit Pass (Temporary Employment)
This is issued to persons who enter the country to take up temporary
employment only.
• Employment Pass
This is issued to persons who enter the country to take up an employment
contract for a minimum period of 2 years.
• Visit Pass (Professional)
This is issued to persons on short-term contracts and such passes generally
do not permit the individual to remain in Malaysia for more than 12 months.
• Dependant’s Pass
This is issued to spouses and children of persons who have been issued with
employment passes. Dependant passes should be applied for, together with
the employment pass or after the latter has been approved.
• Student’s Pass
This is issued to foreign students who enrol for a course of study in any
approved educational institution.
pg. 86
investing in
iskandar

immigration
and
employment
matters
11.1.3 Policy Regarding Employment of Expatriate Personnel
The general policy with respect to the employment of expatriate personnel is
that employment will be permitted where the requisite expertise/skills are not
readily available amongst Malaysians. Employers are encouraged to hire and train
Malaysians at all levels such that the relevant organisation reflects the multicultural
nature of the Malaysian population.
However, it is also recognised that there is a shortage of trained Malaysians in certain
sectors, and it is therefore necessary to hire expatriate personnel to fill this gap.
Foreign-owned companies investing in Malaysia are therefore able to hire
expatriate personnel where necessary and should apply for the relevant number
of expatriate posts required. In addition, such companies are also allowed key
posts (posts that may be permanently filled by foreign nationals) indefinitely. IDRstatus
companies, approved developers and approved development managers
however, will not be subject to any restrictions with respect to the hiring of foreign
knowledge workers.
11.1.4 Application for Expatriate Posts
As mentioned above, where a company requires the services of an expatriate
employee, an expatriate post must be applied for and approved by the Immigration
Department or any agency authorised by the Immigration Department before an
employment pass is obtained for the employee. It is envisaged that IRDA will
be the agency to approve applications made by IDR-status companies, approved
developers and approved development managers.
There is no levy or charge imposed on the granting of expatriate posts/employment
passes where the expatriates earn more than RM3,000 per month and the
contracts are for a term of at least 24 months. However, a nominal fee will be
imposed for key posts and management/professional and technical posts.
11.1.5 Employment of Foreign Workers
Foreign workers differ from expatriate employees in this context in that the
former are not necessarily skilled or trained. There are presently insufficient
Malaysians in the work-force to meet the demand for such workers. Typically,
foreign workers are allowed to work in the construction, plantation, services
(as domestic maids, workers in the hotel industry, trainers and instructors) and
manufacturing sectors.
Foreign workers may only be hired from the following countries:
- Cambodia - Myanmar - Turkmenistan
- India - Nepal - Uzbekistan
- Indonesia - Philippines - Vietnam
- Kazakhstan - Sri Lanka
- Laos - Thailand
Those seeking approval to employ such workers would be required to show that
efforts have first been made to source Malaysians for the jobs to be filled by the
foreign workers.
An annual levy is imposed on employers hiring foreign workers. The levy is
RM100 per month for manufacturing, services and construction sectors. The levy
is RM30 per month for domestic maids and plantation workers.
For further information on Immigration regulations, please refer to the Immigration
Departments’ website at http://www.imi.gov.my.
pg. 87
investing in
iskandar

11.1.6 Special Categories of Employment Passes
The table below outlines the immigration passes for entry into Malaysia
for employment with approved companies (i.e. IDR-status companies,
approved developers and approved development managers) in Iskandar.
no
type of pasS
duration
Eligible Persons
1
Employment Pass
• for Expatriate
Professionals
holding Key
Posts
• administratively
referred to as
‘Employment
Pass (IDR-
Expatriate-Key
Posts)’
• As per
employment
contract
• If employment
contract is
silent, then
duration is
for so long as
the person is
employed by
the approved
company
(subject
to annual
endorsement)
A person (other than a visitor,
tourist, transit passenger or
student) who is entering Malaysia
in order to take up professional
employment or a professional
occupation under a contract:
a) For a minimum period of 2-year
employment in Iskandar with an:
i) IDR-status company;
ii) Approved developer; or
iii) Approved development
manager; and
b) under which such person is
entitled to a salary of not less
than RM5,000 per month.
Eligibility will be certified by the
employer of the Employment Pass
holder (“Employer”).
2
Employment Pass
• for Expatriate
Professionals
holding
Executive Posts
• administratively
referred to as
‘Employment
Pass (IDR-
Expatriate-
Executive
Posts)’
• As per
employment
contract
• If employment
contract is
silent, then
duration is
for so long as
the person is
employed by
the approved
company
(subject
to annual
endorsement)
A person (other than a visitor,
tourist, transit passenger or
student) who is entering Malaysia
in order to take up professional
employment or a professional
occupation under a contract:
a) For a minimum period of 2-year
employment in Iskandar with an:
i) IDR-status company;
ii) Approved developer; or
iii) Approved development
manager; and
b) under which such person is
entitled to a salary of not less
than RM3,000 per month.
Eligibility will be certified by the
Employer.
pg. 88
3
Dependant’s Pass
• for wives &
dependant
children of
holders of
Employment
Pass (IDR-
Expatriate-Key
Post) and
Employment
Pass (IDR-
Expatriate-
Executive Post)
• administratively
referred to as
‘Dependant’s
Pass (IDR)‘
• As per duration
of the husband
/father
holding the
Employment
Pass (IDR-
Expatriate
-Key Post)/
Employment
Pass (IDR-
Expatriate-
Executive Post)
Wife or dependant child (< 21
years) of the holder of a valid
Employment Pass (IDR-Expatriate
-Key Post)/Employment Pass
(IDR-Expatriate-Executive Post)
Eligibility will be certified by the
Employer.
Consent should be automatically
given for the wife to take up
any form of paid employment in
Iskandar – with the condition that
the Dependant Pass is converted
to Employment Pass of either
one of these categories and she
will no longer enjoy the status as
a dependant of the Employment
Pass (IDR-Expatriate-Key
Post)/Employment Pass (IDR-
Expatriate-Executive Post) holder.
investing in
iskandar

immigration
and
employment
matters
no
type of pasS
duration
Eligible Persons
4
Social Visit Pass
• for husbands,
parents, mature
children,
common
law wife &
stepchildren
of holders of
Employment
Pass (IDR-
Expatriate
-Key Post) and
Employment
Pass (IDR-
Expatriate-
Executive Post)
• administratively
referred to as
‘Social Visit
Pass (IDR)’
• As per
duration of the
holder of the
Employment
Pass (IDR-
Expatriate
-Key Post) and
Employment
Pass (IDR-
Expatriate-
Executive Post)
• On yearly basis
Husband, parents, mature child
(≥ 21 years), common law wife
and stepchild of the holder of a
valid Iskandar Employment Pass
(IDR-Expatriate-Key Post) and
Employment Pass (IDR-Expatriate
-Executive Post).
Eligibility will be certified by the
Employer.
If the husband or mature child
later wishes to take up any form of
paid employment in Iskandar, the
Visit Pass will be replaced by an
Employment Pass. The application
will be subject to procedures
applicable to Iskandar.
5
Visit Pass
(Temporary
Employment)
• for domestic
helpers & other
household
/personal
servants of
holders of
Employment
Pass (IDR-
Expatriate-Key
Post) only
• administratively
referred to
as ‘Visit Pass
(Temporary
Employment)
(IDR)’
• As per
duration of the
holder of the
Employment
Pass (IDR-
Expatriate-Key
Post)
A person having a contract of
service of a personal nature with
the holder of a valid Employment
Pass (IDR-Expatriate-Key Post).
Eligibility will be certified by the
Employer.
For person who is to take up
employment for a period of 1 year
or less.
pg. 89
investing in
iskandar

11.2 Legal Requirements under the Employment Act 1955
The primary legislation governing the terms and conditions of employment is
the Employment Act 1955 (EA). The protection offered under the EA relates to
employees whose monthly wages do not exceed RM1,500, manual workers and
a few other specified categories.
The EA stipulates the minimum terms and benefits for such employees including
the requirement to provide rest days, public holidays, annual leave, sick leave,
hospitalisation leave, maternity leave as well as termination benefits. In addition,
the EA regulates the hours of work and specifies the rates to be paid for overtime
work, work on rest days and public holidays.
11.3 Employees Provident Fund (EPF)
The EPF is a statutory fund to which employers and Malaysian employees are
required to contribute. This is obligatory and not optional. Expatriate employees
can choose to contribute to the EPF and if they do, the employer is also obligated
to make employer’s contributions in respect of that expatriate. The contributions
are made to the account of the individual employee.
At present, the employer is required to contribute a minimum of 12% of the
employee’s monthly salary while the employee contributes a minimum of 11% of
his/her salary. The 11% is deducted from the employee’s monthly salary.
The employer’s contribution is tax deductible to the employer. If the employer
contributes more than the obligatory 12%, a tax deduction will be available to
the employer for contributions of up to 19% of the employees’ salary. Resident
employees are allowed to claim a maximum of RM6,000 in respect of EPF
contributions as relief against their taxable income.
Upon reaching the age of retirement, employees may withdraw their money
from the EPF free of tax. Prior to retirement, employees are able to withdraw
a percentage of their EPF contributions for specifically approved purposes.
Expatriates who opt to contribute to the EPF may withdraw their funds tax free
upon leaving Malaysia.
Further information on EPF can be obtained at http://www.kwsp.gov.my
11.4 Social Security Organisation (SOCSO)
An employee employed under a contract of service or apprenticeship and earning
monthly wages of RM3,000 and below must contribute to SOCSO, regardless of
the employee’s age and employment status (whether permanent, temporary or
casual in nature).
SOCSO is an insurance scheme which provides compensation to eligible
employees in the event of death or invalidity or disablement sustained in the
course of exercising their employment.
For employees who earn a monthly salary above RM3,000 and are currently
not subject to SOCSO, contribution is at their own option. However, mutual
agreement for contribution needs to be obtained between the employee and the
employer in which case, the employer shall then be liable to contribute for the
relevant employees.
Further information on SOCSO can be obtained at http://www.perkeso.gov.my
pg. 90
investing in
iskandar

Chapter 12
Incentive and
Support Package
12.1 Approved Node
12.1.1 location map – node 1
12.2 Tax Incentives Available to Companies in Iskandar
12.3 Non-Fiscal Incentives for Iskandar
12.4 Qualifying Activities
12.5 application process
12
investing in
iskandar

A variety of incentives, both fiscal and non-fiscal,
are aimed at attracting investments and the best talents to malaysia

incentive
and support
package
Chapter 12
Incentive and Support Package
12.1
Approved node
An “approved node” is a designated area within Iskandar as determined by IRDA.
12.1.1 Location Map – Node 1
Node 1, an approved node, is shown in the map below.
Danga Bay
nusajaya
gelang patah
node 1
tanjung
pelepas
port
singapore
12.2
Tax incentives available to companies in Iskandar
Tax / fiscal incentives will be made available to approved companies located in the approved
node within Iskandar. ‘Approved companies’ refers to approved developers, approved
development managers and IDR-status companies.
The incentives are as follows:
i) Approved developers
• Exemption from income tax up to year of assessment 2015 on statutory income
from the disposal of any right in or over land within the approved node designated
by IRDA;
ii)
• Exemption from income tax up to year of assessment 2020 on statutory income
from the rental or sale of buildings within the approved node designated by IRDA;
and
• Exemption from compliance with the withholding tax provisions (up to 31
December 2015) on payments made to non-residents for services, interest and
royalties.
Approved development managers
• Exemption from income tax on statutory income from the provision of
management, supervisory or marketing services to an approved developer until
the year of assessment 2020; and
• Exemption from compliance with the withholding tax provisions on payments
made to non-residents for services up to 31 December 2015.
pg. 93
investing in
iskandar

iii)
iv)
IDR-status companies
• Exemption from income tax on statutory income for 10 years provided operations
commence on or before 31 December 2015. The exemption is in respect of
income from qualifying activities within the approved node for clients situated
within the approved node and outside Malaysia or wholly for clients outside
Malaysia; and
• Exemption from compliance with the withholding tax provisions on payments
for services and royalties to non-residents for a period of 10 years from the date
of commencement of operations.
The qualifying activities fall within the following 6 categories of service-based
sectors:
• Creative
• Education
• Financial advisory and consulting
• Healthcare
• Logistics
• Tourism
Please refer to 12.4 below for the list of qualifying activities within the above
sectors.
Companies which do not qualify for incentives as set out in (i), (ii) or (iii) above would
still be able to enjoy existing tax incentives provided under current legislations subject
to the fulfillment of the pre-requisite criteria. Such incentives generally take the form
of pioneer status or investment tax allowance where such companies undertake
promoted activities.
Pioneer status generally provides a tax exemption on 70% of statutory income (i.e.
gross income after deduction of tax deductible expenses and capital allowances) for
a period of 5 years. The investment tax allowance generally provides an allowance of
60% of qualifying capital expenditure to be set off against 70% of statutory income.
However, in certain instances, for both the pioneer status and investment tax
allowance, exemption of up to 100% of statutory income may be available, depending
on the industry involved or activity undertaken by the company. For example, projects
of national and strategic importance will enjoy the 100% exemption.
12.3
Non-fiscal incentives for Iskandar
Approved companies operating in the approved node will enjoy:
• Exemption from the FIC guidelines
• Flexibilities under the foreign exchange administration rules as follows:
a) Make and receive payments in foreign currency with residents;
b) Borrow any amount of foreign currency from licensed onshore banks and nonresidents;
c) Invest any amount in foreign currency assets onshore and offshore; and
d) Retain export proceeds offshore.
• Unrestricted employment of foreign knowledge workers
Foreign knowledge workers in Iskandar will be able to import or purchase a duty free
car for their personal use. This incentive is similar to that offered under the Malaysia My
Second Home Programme.
pg. 94
investing in
iskandar

incentive
and support
package
12.4
Qualifying activities
The list of qualifying activities may be expanded from time to time in line with the
dynamic nature of the activities within the 6 service-based sectors in Iskandar and the
needs of both the investors and the nation. The qualifying activities are as follows:
I
Creative Industry and Related Services
1 Creative and design services
2 Creative talent management services
3 Film and television
• Pre-production
• Production
• Post-production
• Distribution
4 Games and animation
• Content creation
• Production
• Post-production
• Distribution
5 Online and mobile content generation and advertising
6 Online and mobile content aggregation and enablers
7 Creative research and development
8 Distribution and marketing of creative content
9 Integrated media and content services
10 Visual and performing arts
II
Educational Services
1 Universities
2 Colleges
3 Skills training institutions
4 R&D institutions
5 Regional training centres
III
Financial Advisory and Consulting Services
1 Islamic financial services
2 Business process outsourcing/offshoring
3 Corporate consultancy and advisory services
IV
Healthcare and Related Services
1 Hospitals and alternative medicine centres
2 Integrated dental and orthodontic services
3 Healthcare research and development
4 Integrated laboratory services
V
Logistics and Related Services
1 Integrated supply chain services
2 High value supply chain services and solutions
VI
Tourism
1 Hotels
2 Theme parks, amusement and family entertainment centres and cultural
centres
3 Conference centres and exhibition centres
4 Regional operation of hotel and leisure services
pg. 95
investing in
iskandar

12.5
Application process
The flowchart below illustrates the application process to qualify as approved
developers, approved development managers or IDR-status companies.
Investor makes enquiries on eligibility criteria and
requirement for approved companies with IRDA OSC
Pre-Application
Stage
IRDA OSC registers the interest and forwards the relevant forms
together with checklist to applicant
Investor submits formal application with supporting documents
to IRDA OSC
IRDA OSC receives the application and informs investor of
tentative approval date
Processing Stage
IRDA OSC processes the application
IRDA OSC forwards application together
with recommendation for approval to Minister
Approval Stage
Minister approves application
IRDA OSC issues approval certificate together
with handbook for approved companies
Post-Approval
Stage
IRDA OSC updates its master-list of approved companies
and notifies the relevant ministries and agencies
pg. 96
investing in
iskandar

Chapter 13
Frequently Asked
Questions (Faqs)
13
investing in
iskandar

Chapter 13
Frequently Asked Questions (FAQs)
frequently
asked
questions
(FAQs)
1.
2.
3.
What is the Iskandar Development Region (Iskandar)?
Iskandar is the new southern development corridor in Johore that has been identified as
one of the catalyst developments to spur the growth of the Malaysian economy.
Iskandar covers 221,634 hectares (2,217 sq km) of land area within the southern-most
part of Johore. The development region encompasses an area of about 3 times the size of
Singapore and 2 times the size of Hong Kong. Iskandar covers the entire district of Johore
Bahru (including the island within the district), Mukim Jeram Batu, Mukim Sungai Karang,
Mukim Serkat and Kukup Island in Mukim Ayer Masin, all within the district of Pontian.
Who is the Iskandar Regional Development Authority (IRDA)?
IRDA is a Federal statutory body established under the Iskandar Regional Development
Authority Act 2007.
The primary objective of IRDA is to realise the vision of developing Iskandar into a strong
and sustainable metropolis of international standing. Accordingly, IRDA’s main focus and
roles are:
• Establishing policies, directions and strategies that have a direct impact on development
activities within Iskandar
• Coordinating the performance of the activities carried out by Government entities in
Iskandar
• Promoting, stimulating, facilitating and undertaking development in Iskandar
• Acting as a “one-stop centre” to deal with investors and responding to investors’
needs in a timely and efficient manner
What are the key promoted sectors in Iskandar?
Six service-based sectors have been identified as new pillars to strengthen existing
economic sectors in the region. These will support the attainment of greater long-term
growth and stability for the Iskandar economy. The six targeted service-based sectors (as
identified in the Comprehensive Development Plan) are as follows:
• Creative
• Education
• Financial advisory and consulting
• Healthcare
• Logistics
• Tourism
Companies undertaking qualifying activities within the above sectors in the approved node
within Iskandar will be eligible to apply for IDR-status.
pg. 99
investing in
iskandar

4.
5.
6.
7.
8.
9.
What is an IDR-status company?
An IDR-status company is a company incorporated under the Companies Act 1965 and
approved by MOF and resident in Malaysia which undertakes a qualifying activity in the
approved node within Iskandar for customers located within the approved node and
outside Malaysia or wholly for customers outside Malaysia.
The qualifying activities will be related to the following 6 categories of service-based sectors:
• Creative
• Education
• Financial advisory and consulting
• Healthcare
• Logistics
• Tourism
What are the benefits of an IDR-status company?
Subject to the fulfillment of the pre-requisite criteria set out by IRDA, IDR-status companies
will enjoy:
• Exemption from the Foreign Investment Committee (FIC) rules
• Flexibilities under the foreign exchange administration rules as follows:
– Make and receive payments in foreign currency with residents;
– Borrow any amount of foreign currency from licensed onshore banks and nonresidents;
– Invest any amount in foreign currency assets onshore and offshore; and
– Retain export proceeds offshore.
• Unrestricted employment of foreign knowledge workers
• Eligibility for tax incentives
What are the tax incentives available for an IDR-status company?
The tax incentives are:
• Exemption from corporate income tax for a period of 10 years in respect of statutory
income derived from qualifying activity carried out within the approved node for
customers situated within the approved node and outside Malaysia or wholly for
customers outside Malaysia. Such activities must commence on or before 31
December 2015; and
• Exemption from compliance with the withholding tax provisions on payment of royalty
and services fee to non-residents for a period of 10 years from commencement of
operations.
Can other companies in Iskandar (e.g. non IDR-status companies) which
do not carry out any of the qualifying activities enjoy tax incentives?
Yes, such companies may apply for existing tax incentives which are currently available
subject to the fulfilment of the pre-requisite criteria. Please visit MIDA’s website at www.
mida.gov.my for further information.
Can employers hire foreign/expatriate employees?
Yes, it will be possible to employ foreign/expatriate employees with relative ease where
such employees are required. For IDR-status companies, approved developers and
approved development managers, they are freely allowed to employ foreign knowledge
workers.
What are the incentives for a foreign knowledge worker in Iskandar?
‘Foreign knowledge workers’ in Iskandar will be able to import or purchase locally a duty
free car for their personal use.
pg. 100
investing in
iskandar

frequently
asked
questions
(FAQs)
10.
11.
12.
13.
14.
Will foreigners / foreign knowledge workers working in Iskandar
enjoy any income tax incentives?
No, they will not enjoy any special income tax incentives/exemption. These individuals will
be subject to the general income tax law.
What is the Government’s policy on foreigners working in Malaysia?
While foremost on the national agenda is the development and training of a skilled
and capable workforce among Malaysians, the Government recognises that in some
instances, foreign expertise and labour are required. Therefore, a foreigner may work in
Malaysia provided that the pre-requisite criteria are met such as the qualification of the
foreign individual, the profile of the employer and the sector/industry. No restriction will
be imposed on IDR-status companies, approved developers or approved development
managers with respect to hiring of foreign knowledge workers.
What approvals are required for foreigners intending to work in
Malaysia?
All foreigners who intend to work in Malaysia must first obtain the necessary permit or
pass from the Immigration Department of Malaysia. The type of permit or pass required
depends on which of the following 3 categories the foreigner falls into:
• expatriate personnel, who require an Employment Pass;
• foreign unskilled/semi-skilled workers, who require a Visit Pass (Temporary
Employment); and
• foreign skilled workers, who require a Visit Pass (Professional).
The necessary permit or pass is to be obtained before the individual comes to Malaysia.
Further information can be obtained at http://www.imi.gov.my.
Can a foreigner work on a short-term attachment?
Artists, missionaries, experts or volunteers are allowed to work on a short-term basis after
having obtained a Visit Pass (Professional). The validity of the Visit Pass (Professional)
varies but under normal circumstances, it will not exceed 12 months. The applicant must
be outside Malaysia when the application is made.
Entry will only be allowed upon approval of the pass.
I have foreign visitors who will be arriving in Malaysia for meetings.
Do they need to apply for visit passes?
Foreign visitors entering the country with a valid passport and visa can obtain a Visit Pass
(Business) which is issued solely for the purpose of a social and/or business visit such as:
• owners and company representatives entering Malaysia to attend a company meeting
or seminar, to inspect the company’s accounts or to ensure the smooth running of the
company
• investors or businessmen entering to explore business opportunities and investment
potential
• foreign representatives of companies entering Malaysia to introduce goods for
manufacture in Malaysia, but not to engage in direct selling or distribution
• property owners entering Malaysia to negotiate, sell or lease properties
• foreign reporters from mass media agencies entering Malaysia to cover any event in
Malaysia
• participants in sporting events
A Visit Pass (Social) cannot be used for employment.
pg. 101
investing in
iskandar

15.
16.
17.
18.
19.
20.
21.
22.
What are the immigration procedures for travel to and from
Singapore?
The travel procedures and immigration requirements are currently unchanged. However,
the Governments of Malaysia and Singapore are currently working on a simplified
immigration procedure.
Is Iskandar a duty free zone?
Iskandar, as a whole, is not a duty free zone. However, there are certain areas within
Iskandar which have been accorded free zone status.
Are Malaysians entitled to operate in Iskandar?
Yes, Iskandar is open to all Malaysians. In order to qualify for IDR-status, Malaysian-owned
companies are subject to the same criteria as other parties.
Is there a 30% Bumiputra equity requirement for IDR-status companies?
No, IDR-status companies are not required to have 30% Bumiputra equity.
What should a company do if it would like to apply for IDR-status?
All enquiries can be directed to IRDA by sending an e-mail to enquiries@irda.com.my
Are there distinct rules for incorporation of companies in Iskandar,
or do the normal rules under the Companies Act 1965 apply?
The Companies Act 1965 and all the relevant procedures will similarly apply to all companies
operating in Iskandar. There are no special incorporation rules for IDR-status companies.
Are IDR-status companies, approved developers and approved
development managers or other companies operating in Iskandar which
enjoy tax incentives required to file tax returns?
Yes, the tax administration system for all companies operating in Iskandar is the same as
that for all other companies operating outside Iskandar.
If I have any queries in relation to Iskandar, who can I approach?
Please contact:
Iskandar Regional Development Authority
Level 8, Menara MSC Cyberport (Menara Sarawak)
5, Jalan Bukit Meldrum, 80300 Johore Bahru
Johore, Malaysia
Toll Free No : 1-800-88-3010
Tel : +607 218 3010
Fax : +607 218 3111
E-mail : enquiries@irda.com.my
pg. 102
investing in
iskandar

Useful Information
Useful Information (Johore)
Useful Addresses
Sources Of Information
investing in
iskandar

useful
information
Useful Information (Johore)
entry Points
By Road
Entry into
Johore by road
can be made via
the following
major routes:
• Johore
Causeway;
2nd link
• North-South
Expressway
• Federal
Trunk Road
(Route 1)
• East Coast
Trunk Road
(Route 3)
• West Coast
Trunk Road
(Route 5)
By Rail
The rail service
is provided by
Keretapi Tanah
Melayu Berhad.
To check the
interstate train
schedule, go
to http://www.
ktmb.com.my
By Air
Direct entry is
via the Sultan
Ismail Airport
(or locally known
as the Senai
International
Airport). It is
located in the
district of Johore
Bahru, about
34km from the
capital city of
Johore Bahru.
Airport limousine
services are
available
to various
destinations
at fares
controlled by the
Government.
There are also
scheduled
airport coach
services to
Johore Bahru
city centre.
By sea
The following
are the sea
entry points into
Johore:
• Johore Bahru
International
Ferry
Terminal
(Johore Bahru
district)
• Pasir Gudang
(Johore Bahru
district)
• Kukup
(Pontian
district)
• Muar (Muar
district)
• Tanjung
Belungkor
(Kota Tinggi
district)
• Tanjung
Pengelih
(Kota Tinggi
district)
standard cost of living
rM
usd
Lunch at a food court 6 - 10 1.69 - 2.82
Lunch at a restaurant in a 5-star hotel 50 - 100 14.11 - 28.21
Burger King (Whopper) 7.95 2.24
KFC (Snack plate) 8.20 2.31
McDonald’s (Big Mac) 5.70 1.61
Pizza Hut (12-inch pizza) 25.90 - 30.90 7.31 - 8.72
Sushi King (Set meals) 13.90 - 29.90 3.92 - 8.44
Note: USD1 = RM3.54
pg. 105
investing in
iskandar

RENTAL COSTS (EXPATRIATE)
prime Urban Residential Area Suburbs of Johore Bahru
in Johore Bahru (per month)
(per month)
rM
USD
rM USD
Houses
Bungalow 10,000 - 28,000 2,821 - 7,900 5,000 - 10,000 1,411 - 2,821
Double semi-detached 4,000 - 8,000 1,129 - 2,257 2,500 - 8,500 705 - 2,398
Terrace 2,000 -3,500 564 - 987 1,000 - 2,500 423 - 705
Apartments/Condominiums
1-bedroom 1,500 - 3,000 423 - 846 1,000 - 1,500 282 - 423
2-bedroom 2,500 - 6,500 705 - 1,834 1,900 - 3,200 536 - 903
3-bedroom 3,500 - 15,000 987 - 4,232 2,700 - 8,500 762 - 2,398
Note: USD1 = RM3.54
MAJOR ENTERTAINMENT/SHOPPING AND RECREATIONAL FACILITIES
Johore Bahru City Square, Plaza Kota Raya, Plaza Pelangi, Plaza Angsana, Leisure Mall,
Komplek Tun Abd Razak (KOMTAR), Stulang Duty Free Zone, Holiday Plaza, Carrefour, Jaya
Jusco (Permas Jaya, Tebrau City and Taman Universiti), Perling Mall, Xtra Super Centre, Giant
Hypermarket, Lien Hoe Complex, Plaza Tasek and Kompleks Membeli-belah Landmark.
BEACHES
Stulang Laut, Tanjung Piai, Rambah Beach, Punggor Beach, Minyak Beku Beach, Teluk
Mahkota Beach, Tanjung Balau Beach, Desaru Beach, Batu Layar Beach, Teluk Punggai
Beach, Teluk Ramunia, Teluk Endau Beach, Penyabong Beach, Air Papan Beach, Teluk Buih
Beach, Tenglu Beach, Tanjung Leman Beach, Tanjung Resang Beach, Teluk Sari Beach,
Teluk Gorek Beach and Teluk Sisek Beach.
HEALTH AND MEDICAL CENTRES
There are more than 20 government and private hospitals in Johore.
ISLANDS (OFF Johore)
Rawa Island, Besar Island, Tinggi Island, Tengah Island, Sibu Island, Pemanggil Island, Aur
Island, Sialu Island and Upeh Island.
HIGHER EDUCATION CENTRES
• University of Technology Malaysia
• University of Tun Hussein Onn
• Open University of Malaysia
• University of Tun Abdul Razak
• More than 15 private colleges and institutions
pg. 106
investing in
iskandar

useful
information
PROJECTED POPULATION IN Iskandar
year 2005 (‘000) 2025 (‘000) AVERAGE ANNUAL
growth RATE (%)
Malaysia 26,748 39,549 2.0
Johore 3,170 5,000 2.3
Iskandar 1,353 3,000 4.1
PROJECTED GROWTH RATES AND SELECTED ECONOMIC INDICATORS WITH OR
WITHOUT Iskandar INTERVENTION
indicator note johore Iskandar rest of
(2005 - 2025) state (%) (%) johore (%)
GDP Growth With Iskandar 7 8 5.2
Without Iskandar 5.5 6 4.7
GDP Per Capita Growth Rate With Iskandar 4.6 3.8 4.7
Without Iskandar 3.4 3 3.5
Productivity Growth With Iskandar 4 3.3 4.2
Without Iskandar 3 1.7 2.8
Employment Growth With Iskandar 2.8 4.3 0.9
Without Iskandar 2.3 3 1.8
Unemployment Rate With Iskandar (3.5) - 3 (2.2) - 2.1 (4.8) - 4.5
Without Iskandar (3.5) - 6.2 (2.2) - 5.2 (4.8) - 6.7
Population Growth With Iskandar 2.3 4.1 0.5
Without Iskandar 2.1 2.9 1.4
PROJECTED IMPACT ON SELECTED ECONOMIC INDICATORS WITH OR WITHOUT
Iskandar INTERVENTION
W with Iskandar without Iskandar
Population Size 3 million 2.3 million
GDP (PPP) in USD billion 93.3 64.1
GDP Per Capita (PPP) in USD 31,100 26,694
Labour Force 1.46 million 1.16 million
Employment 1.43 million 1.0 million
Unemployment 1.8% 5.2%
pg. 107
investing in
iskandar

Useful Addresses
PRIME MINISTER’S DEPARTMENT
Perdana Putra Building
Federal Government Administrative Centre
62502 Putrajaya, Malaysia
Tel : (603) 8888 8000
Fax : (603) 8888 3444
Website: http://www.pmo.gov.my
ISKANDAR REGIONAL DEVELOPMENT
AUTHORITY (IRDA)
Level 8, Menara MSC Cyberport
5 Jalan Bukit Meldrum
80300 Johore Bahru
Johore, Malaysia
Tel : (607) 218 3010
Fax : (607) 218 3001
Website: http://www.idr.com.my
MINISTRY OF INTERNATIONAL TRADE
AND INDUSTRY (MITI)
Block 10, Government Offices Complex
Jalan Duta
50622 Kuala Lumpur, Malaysia
Tel : (603) 6203 3022
Fax : (603) 6201 2337
Website: http://www.miti.gov.my
INLAND REVENUE BOARD OF
MALAYSIA (IRB)
15th Floor, Block 9
Kompleks Bangunan Kerajaan
Jalan Duta
50758 Kuala Lumpur
Tel : (603) 6209 1000
Fax : (603) 6201 1179
Website: http://www.hasilnet.org.my
COMPANIES COMMISSION OF
MALAYSIA (CCM)
Head Office:
2 & 10-18th Floor, Putra Place
100 Jalan Putra
50622 Kuala Lumpur
Tel : (603) 4047 6000
Fax : (603) 4047 6317
Website: http://www.ssm.com.my
MINISTRY OF FINANCE
Finance Ministry Complex, Precinct 2
Federal Government Administrative Centre
62592 Putrajaya, Malaysia
Tel : (603) 8882 3000
Fax : (603) 8882 3892 / 3894
Website: http://www.treasury.gov.my
SOUTH JOHOR INVESTMENT
CORPORATION BERHAD (SJIC)
Suite 17-03A Level 17
Menara MSC Cyberport
5 Jalan Bukit Meldrum
80300 Johore Bahru
Johore, Malaysia
Tel : (607) 222 2320
Fax : (607) 222 3662
Website: http://www.sjic.com.my
MALAYSIAN INDUSTRIAL
DEVELOPMENT AUTHORITY (MIDA)
Block 4, Plaza Sentral
Jalan Stesen Sentral 5
Kuala Lumpur Sentral
50470 Kuala Lumpur, Malaysia
Tel : (603) 2267 3633
Fax : (603) 2274 7970
Website: http://www.mida.gov.my
ROYAL MALAYSIAN CUSTOMS
HEADQUARTERS
Royal Malaysian Customs Headquarters
Ministry of Finance Complex (MOF)
No.3, Perdana Boulevard
Precinct 2
62592 Putrajaya, Malaysia
Tel : (603) 8882 2100
Fax : (603) 8889 5901
Website: http://www.customs.gov.my
IMMIGRATION DEPARTMENT OF
MALAYSIA
Headquarters (Ministry of Home Affairs):
Level 1-7 (Podium) Block 2G4, Precinct 2
Federal Government Administration Centre
62550 Putrajaya, Malaysia
Tel : (603) 8880 1000
Fax : (603) 8880 1200
Website: http://www.imi.gov.my
pg. 108
investing in
iskandar

useful
information
Sources of Information
The information contained in this publication is compiled from
information obtained from the following websites:
• Central Bank of Malaysia (Central Bank) www.bnm.gov.my
• Companies Commission of Malaysia (CCM) www.ssm.com.my
• Department of Statistics Malaysia www.statistics.gov.my
• Employees Provident Fund (EPF) www.kwsp.gov.my
• Foreign Investment Committee (FIC) www.epu.jpm.my
• Immigration Department of Malaysia www.imi.gov.my
• Inland Revenue Board of Malaysia (IRB) www.hasilnet.org.my
• Iskandar Regional Development Authority (IRDA) www.idr.com.my
• Johore State Government www.johordt.gov.my
• Johor State Investment Centre www.jsic.com.my
• Johor Tourism Action Council www.tourismJohor.com
• Malaysian Industrial Development Authority (MIDA) www.mida.gov.my
• Malaysian Institute of Accountants www.mia.org.my
• Ministry of Finance www.treasury.gov.my
• Royal Malaysian Customs Department www.customs.gov.my
• Securities Commission of Malaysia www.sc.com.my
• South Johor Investment Corporation Berhad (SJIC) www.sjic.com.my
• Social Security Organisation (SOCSO) www.perkeso.gov.my
• The Malaysian Government www.gov.my
• Tourism Malaysia www.visitmalaysia.com.my
pg. 109
investing in
iskandar

glossary
AGM
Annual General Meeting
AIC
Approvals and Implementation Committee
ASEAN Association of Southeast Asian Nations
BNM
Bank Negara Malaysia
CA Companies Act 1965
CCM
Companies Commission of Malaysia
CDP
Comprehensive Development Plan
EA Employment Act 1955
ECM
Exchange Control Notice of Malaysia
EPF
Employees Provident Fund
EPU
Economic Planning Unit
FCA
Foreign Currency Account
FIC
Foreign Investment Committee
FRS
Financial Reporting Standard
GST
Goods and Services Tax
IMS-GT Indonesia-Malaysia-Singapore Growth Triangle
INCEIF International Centre for Education in Islamic Finance
IOFC
International Offshore Financial Centre
IPC
International Procurement Centre
IPO
Initial Public Offering
IRB
Inland Revenue Board
IRDA
Iskandar Regional Development Authority
ISKANDAR Iskandar Development Region
ITA Income Tax Act 1967
KPRJ
Kumpulan Prasarana Rakyat Johor Berhad
LDIC Layout Designs of Integrated Circuits Act 2000
MASB
Malaysian Accounting Standards Board
MESDAQ Malaysian Exchange of Securities Dealing and Automated Quotation
MIDA
Malaysian Industrial Development Authority
MIFC
Malaysia International Islamic Financial Centre
MIPC
Intellectual Property Corporation of Malaysia
MOF
Minister/Ministry of Finance
OECD
Organisation for Economic Co-operation and Development
OHQ
Operational Headquarters
OSC
One Stop Centre
PCA
Principal Customs Area
PCT
Patent Cooperation Treaty
PERS
Private Entity Reporting Standards
RDC
Regional Distribution Centre
RPGT
Real Property Gains Tax
SC
Securities Commission
SJIC
South Johor Investment Corporation
SOCSO Social Security Organisation
STA Sales Tax Act 1972
STD
Schedular Tax Deduction Scheme
TRIPS
Agreement on Trade Related Aspects of Intellectual Property
VAT
Value Added Tax
WTO
World Trade Organisation
definition
• IDR-status company means a company:
a) incorporated under the Companies Act 1965 and resident in Malaysia which
undertakes a qualifying activity (as approved by MOF) in designated area within
Iskandar as determined by IRDA (“approved node”); and
b) approved by MOF.
• Approved developer means a company:
a) incorporated under the Companies Act 1965 and resident in Malaysia which purchases
or acquires any right or rights over part or the whole of the land to undertake
development in an approved node in accordance with the master plan for the said
node; and
b) approved by MOF.
pg. 110
investing in
iskandar
• Approved development manager means a company:
a) incorporated under the Companies Act 1965 and resident in Malaysia appointed by
an approved developer to provide management, supervisory or marketing services
in relation to the activity of the developer in an approved node in accordance with
the master plan for the said node; and
b) approved by MOF.

Iskandar Regional Development Authority
Level 8, Menara MSC Cyberport (menara sarawak)
5, Jalan Bukit Meldrum, 80300 Johore Bahru
johore, Malaysia
toll free no : 1-800-88-3010
tel : +607 218 3010
Fax : +607 218 3111
E-mail : enquiries@irda.com.my
website : www.idr.com.my
First edition: OCTOBER 2007
information contained in this handbook is available at www.idr.com.my
and accurate at the time of printing. for latest updates, log on to www.idr.com.my
Published by: Iskandar Regional Development Authority
Acknowledgement:
This publication is a collaboration amongst the following:
• Iskandar Regional Development Authority
• south johor investment corporation berhad
• TAXAND MALAYSIA Sdn Bhd
• Zaid Ibrahim & Co