UPDATES ON POLICIES, INCENTIVES & FINANCIAL SUPPORT IN THE MANUFACTURING AND SERVICES SECTORS (MEDICAL DEVICES, MACHINERY & EQUIPMENT) 31 October 2013 Eastern & Oriental, Penang

Table of Contents

Malaysian Economy Malaysia Investment Performance Investment Policies & Incentives Investment Approach Medical Devices Industry Machinery & Equipment Industry Outsourcing Opportunities Financial Assistance Introduction of MIDA

Malaysian Economy

MALAYSIA’S KEY ECONOMIC INDICATORS

2010 2011 2012 1H 2013

Real GDP (%) 7.2 5.1 5.6 4.2

Inflation (%) 1.7 3.2 1.6 1.6

Per Capita Income (US$) 8,140 9,508 9,974 10,134f

Unemployment (%) 3.2 3.1 3.0 3.1

Trade Surplus (US$ bil) 34.2 39.3 30.7 8.0

International Reserves (US$ bil) 106.5 133.6 139.7 136.6*

Retained Imports Equivalent (months) 8.5 9.7 9.5 9.7*

Source: Central Bank of Malaysia/Department of Statistics Malaysia/MATRADE * As at 14th October 2013

Malaysia Investment Performance

TOTAL INVESTMENT APPROVED 2012

Investments in Malaysia reached

111.3

148.8136.9

104.8 105.6

154.6 162.4

0

30

60

90

120

150

180

2006 2007 2008 2009 2010 2011 2012

RM Billion

new record level in 2012

TOTAL INVESTMENT APPROVED 2012

RM162.4 bil.

6,442 projects

182,841 jobs

Total Investment Approved By Sectors In 2012

RM 162.4 billion

Manufacturing 25.2%

Primary 2.4%

Services 72.4%

FDI Inflows into Malaysia

Source: Bank Negara Malaysia

Increasing Trend of Gross FDI Inflows into Malaysia

10

Countries US$ Million

2011 2012

Singapore 55,923 56,651

Indonesia 19,241 19,853

Malaysia 12,198 10,074

Thailand 7,779 8,607

Viet Nam 7,430 8,368

Source: UNCTAD

Malaysia Sustained its Ranking in ASEAN

DOMESTIC DIRECT INVESTMENT

increase

Foreign Investments

(RM20.8 billion)

Domestic Investments

(RM20.2 billion)

49.3% 50.7%

Domestic investments continue to

Foreign Investments

(RM19.9 billion)

Domestic Investments

(RM14.2 billion)

41.6% 58.4%

2012 2000

Private Investments on an Increasing Trend

In 2012, private investments registered a growth of 24.3% to RM140.2 billion from RM112.8 billion in 2011, following an annual growth of 14.4% in 2011 from 2010.

The continuous double digit growth in investments in the first 2 years of the RMK10, reflects that private investments are on-track to meet the ETP targets.

In Q1 2013, private investments of RM38.5 billion registered a growth of 11.8% compared with RM34.4 billion in Q1 2012, and had achieved 24% of the target RM160.3 billion set for 2013.

Year Current Price

RM bil.

2010 98.6

2011 112.8

2012 140.2

Q1 2013 38.5

Source: DOSM

APPROVED MANUFACTURING PROJECTS, 2012 and Jan - August 2013

Year No. of

Projects No. of

Employment

Proposed Investment (RM billion)

Domestic Foreign Total

2012 804 76,631 20.21 20.91 41.12

2013 Jan – Aug

463 50,498 18.80 11.10 29.90

TOTAL 1,267 127,129 39.01 32.01 71.02

Source: MIDA

REALISED INVESTMENT IN THE MANUFACTURING SECTOR BY MAJOR SECTORS, AS AT 2012

E&E30%

Petroleum11%

Basic Metal10%

Chemicals8%

Non-Metallic5%

Transport 6%

Food4%

Natural Gas4%

Fab. Metal4%

M&E3%

Others15%

Total Investment

US$ 156.1 bil

Total Foreign Investment

US$ 86.9 bil

Total Projects 18,148 Source: Malaysian Investment Development Authority

No. Country Investment

(USD billion)

1. Japan 22.0

2. USA 18.9

3. Singapore 8.0

4. Germany 6.2

5. Taiwan 5.3

6. Netherlands 4.6

7. South Korea 4.0

8. United Kingdom 1.8

9. Hong Kong 1.6

10. India 1.1

Source: MIDA

REALISED INVESTMENTS IN MANUFACTURING SECTOR

BY MAJOR COUNTRIES AS AT 31 DEC.2011

REALISED INVESTMENTS IN MANUFACTURING SECTOR BY MAJOR COUNTRIES AS AT 31 DEC 2012

Investment Policies & Incentives

Industries manufacturing intermediate goods:

Resourced-based industries:

• Alternative Energy Sources

• Biotechnology

• Advanced materials

• Advanced electronics

• Optics and photonics

• Petrochemicals

• Pharmaceuticals

• Medical devices

• ICT

• Aerospace

• Oil & Gas • Food & Agro based • Value-added products from natural resources

• Machinery & equipment • Components & parts • Moulds and dies

High technology, capital intensive & knowledge driven industries:

PROMOTED ACTIVITIES IN THE MANUFACTURING SECTOR

PROMOTED ACTIVITIES IN THE SERVICES SECTOR

Regional Establishments Operational Headquarters (OHQ) International Procurement Centre (IPC)

Regional Distribution Centre (RDC)

Logistics

Integrated Logistics Services Cold Chain Facilities

Tourism Hotel Tourist project Recreational camp Convention centre

PROMOTED ACTIVITIES IN THE SERVICES SECTOR

Repatriation of Funds

Foreign Equity

Liberal Expatriate Post Approvals

INVESTMENT POLICIES

Pioneer Status

Income tax exemption ranging from 70% to 100% for a period

of 5 to 10 years

Investment Tax Allowance

60% to 100% on qualifying capital expenditure for 5 years

Reinvestment Allowance

60% on qualifying capital expenditure for 15 consecutive years

Import Duty & Sales Tax Exemption

For raw materials/components and Machinery and Equipment

Incentives

MAJOR INCENTIVES PROVIDED

Investment Approach

QUALITY INVESTMENT

Quality Investment (FDI & DDI)

Strong Linkages with Domestic

Industries

Completing the

ecosystem

Capital Intensive

High Value Added

Utilization of natural

resources Green &

Clean Technology

Skills Intensive

High Income Jobs

Iconic/ Pioneer Project

High Technology &

Knowledge Intensive

ECOSYSTEM APPROACH

Promote the entire value chain of industry clusters.

Strengthen & complete the ecosystem

25

Malaysian Conglomerate

Seminars, Dialogues,

Workshops, RTMs

Friends of Domestic

Investment (F.O.D.I) E-BizMatch

Leveraging Programme for MNCs &

Vendors

Identifying Potential

Projects by MIDA States

Database Development

Domestic Investment Highlights

Domestic SPM

Global Champions

Outreach Programmes

Mobilising Domestic Investment

Greater focus on domestic investors through strategic & structured engagement

MILESTONES

MEDICAL DEVICE INDUSTRY IN MALAYSIA

MALAYSIA’S ENERGY VISION

ESTABLISHMENT OF 12 NATIONAL KEY ECONOMIC AREAS (NKEAs)

NKEAs selected which can

materially impact economic growth

Greater KL

Agriculture

Palm oil

Comms Content Infrastructure

Education

Electrical & electronics

Oil, gas & energy

Tourism Wholesale and retail

Financial services

Business services

Healthcare

MALAYSIA’S ENERGY VISION MEDICAL DEVICES ENTRY POINT PROJECTS (EPPs)

Medical Devices

Single-Use Devices (SUD)

Medical Devices Contract

Manufacturing

Malaysian Clinical Devices

Champions

Contract Manufacturing Supply Chain

Medical Equipment

Refurbishment Hub

Medical Hardware/ Furniture Cluster

In-Vitro Diagnostics

(IVD) Market

MALAYSIA’S ENERGY VISION Medical Device Companies in Operation

Total: 190 companies in Malaysia (manufacturing, distribution, sales) Source : AMMI

MALAYSIA’S ENERGY VISION Major Foreign Medical Device Companies in Malaysia

MALAYSIA’S ENERGY VISION Medical Device Industry Ecosystem

Consumables Implants &

Surgical Instruments Healthcare Equipment

Technology Latex/ Plastic

Metal Machining Electronics Furniture

Certification Packaging Testing Industry Group

Education Training Regulatory

Products

Companies

Medical Gloves, Contraceptives,

Catheters, woundcare,

Opthalmology, IVD, SUD

Pacemakers, Orthopedics,

Surgical instruments

Electronic Modules

Life Science Instruments

Electrodes, Hospital beds

Sterilization

Supporting Infrastructure

Machinery & Engineering Supporting Industry

Electronic Manufacturing

Services

Medical Compounds

Clinical Research Center

MALAYSIA’S ENERGY VISION

Business Opportunities: Malaysia as a Medical Device Hub in Asia

MEDICAL

DEVICES

Electromedical

equipment

Cardiovascular

devices

Orthopaedic

devices

In-vitro

diagnostic

products

Wound care

products

Contract

Manufacturing

Research/Design

& Development

MILESTONES

Machinery and Equipment Sector

Machinery & Equipment and Advanced Engineering

Industry Snapshot – Malaysia (2012)

Production RM32.6 billion*

Exports RM 25.2 billion#

Imports RM52.9 billion# Companies

M&E (1031) , ESI (1004)

2,077

Employees 133,859

* Source from Frost and Sullivan at 2008 with consideration of 5% growth # Matrade

M&E

ESI

Sectors

Manufacturing Services Primary

1. Specialised / Process M&E 2. Metal Working M&E 3. General M&E, Modules &

Components 4. Power Generating

1. Mould & Die 2. Forging 3. Machining 4. Surface Engineering 5. Stamping 6. Heat Treatment 7. Casting

4 main categories

Activities/services

MALAYSIA’S ENERGY VISION COMPANIES IN PRODUCTION M&E AS AT 2012

Specialised/ process M&E,

425

Metal Working M&E, 27

Power Generating, 51

General M&E, 528

M&E

Total companies: 1,031

INVESTMENT OPPORTUNITIES IN M&E & ESI

Engineering Supporting Industries –

Solution for Hi-Tech

Manufacturing

Hi Tech M&E

Customized M&E

Targeted Sectors

• Oil & Gas • Semiconductor

Processing • Food & Beverage • Agricultural • Plastic Processing

• Robotics & Automation

• Metalworking Machinery

• Packaging Machinery

• Material Handling Equipment

• Forging • Casting • Machining • Surface Engineering • Heat Treatment • Stamping • Mould, tool & die

I. Moving towards high technology and high value added M&E manufacturing II. Promoting Malaysia as the strategic and cost effective destination for

manufacturing solutions and outsourcing

E&E Industry Cluster (Semiconductor processes)

Wafer Processing Wafer Fabrication

TPM, Kulim High Tech, Sirim, PSDC, UTM, USM, UM

Total engineering solutions for high precision – Frencken , Kobay , UMS Group

Automatic Test Equipment (ATE) ,

Back-end processing

Epitaxial Deposition Etching Equipment

PVD, CVD Laser Lithography

Crystal Growth

Slicing & Polishng

Wafer Testing

& Dicing

Assembly &

Packaging (Back-end)

Process

Equipment

Companies

Supporting Services/ Facilities

Research, Training &

Infra

Furnace Crystal Puller

Diamond Wire Saw

Edge Grinding Wafer Polisher

Back-end processes

Photolithography

Etching & Metallisation

Clients

Silterra X-Fab Infineon On Semiconductor Fuji Electric MEMC Tech Intel Infineon Linear Tech. Carsem Unisem ASE Freescale Semiconductor NXP Texas Instrument

Cleanroom Class 1 to 100

Way Forward: Moving towards high technology and high value added M&E manufacturing

Strategic approach for competitive

M&E Segments

• Focus subsector

• Process equipment – back-end semiconductor processes

• Automation: for automotive, HDD & electrical industries

• Material handling equipment

Strategic approach for non-competitive M&E Segments

• Focus subsector

• High Tech M&E

• Machine Tools

• Plastic processing M&E

• Robotics

• Packaging M&E

• Customized M&E

• Oil & Gas

• Front-end semiconductor processes

Promotion Strategy Global Mindset Increase Focus on Export

Development Strategy To move up the value chain supporting the high tech industries: • Front-end semiconductor processing • Medical • Aerospace Enhancing capabilities • R&D & Training Enhancing capacities • Machinery / testing & QC equipment

Promotion Strategy Encourage FDI for • Technology transfer • Develop critical mass

Development Strategy Establish dynamics & resilient supply chain

Way Forward: Malaysia - destination for manufacturing solutions and outsourcing

Development strategy - Enhancing domestic capabilities & capacities

>Technology Development

> Skill and People Development

> Upgrading & modernizing of facilities

Promotion strategy - Global Mindset

> Aggressive marketing and promotion - to promote Malaysian capabilities - integrate into the global production network

Development strategy - to establish dynamic & resilient supply chain

> Consolidation

> companies with specialty services and expertise to merge / form strategic grouping

Focus Subsectors A. Competitive M&E Segments B. Engineering Supporting Industries (ESI)

SPECIAL INCENTIVES FOR M&E

Incentive Quantum Criteria:-

− Targeted Machinery & Equipment

− Level of Investment

− Level of Technology and R&D

− Transfer of Technology

− Spin off/ Outsourcing

Pioneer Status

• Up to 10 years full income tax exemption

Investment Tax Allowance

• Up to 100% of qualifying capex incurred within 5 years for income tax exemption

Outsourcing Opportunities

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER OPPORTUNITIES FOR CROSS-BORDER NEMs

Source : UNCTAD report on Non-Equity Modes of International Production and Development

Key figures of cross-border Non-Equity Modes, selected industries, 2012

Estimated NEM-related worldwide

Sales Value added Employment Employment in

developing economies

USD billion USD billion million million

Contract Manufacturing – selected technology/ capital intensive industries

Electronics 230 - 240 20 - 25 1.4 - 1.7 1.3 - 1.5

Automotive components 200 - 220 60 - 70 1.1 - 1.4 0.3 - 0.4

Pharmaceuticals 20 - 30 5 - 10 0.1 - 0.2 0.05 - 0.1

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER GLOBAL MARKET SHARE

Source : Datamonitor

Global Market Sales Forecast for 2013

(USD billion)

25 – 30% is

estimated for

outsourcing

of

components

and services

• Consistent quality of production and on-time delivery

• Lower cost for high technology products

• High volume, low mix demand for the electrical & electronics, telecommunications and automotive industries

• Low volume, high mix niche products for the medical, machinery & equipment, oil & gas and aerospace industry

• IP protection, laws and regulations

• Financial incentives and operational support

Competitive Edge

• Engineering supporting industry (more than 1,000 cos.)

• Metal fabrication (well established)

• Semiconductor/ electronics components

• Silicon wafer, Wafer fab, IC packaging and testing, IC design house, PCB, PCBA, LED, Other passive components (about 380 cos.)

• Plastic components (480 cos.)

• Rubber components (180 cos.)

Sourcing Capabilities

• Harnessing outsourcing opportunities

• Scale up (capability & capacity)

• Intensifying R&D and technology acquisition

• Complying to International Standards/ Certifications

• Encourage companies to merge/ form joint ventures to be more competitive globally

• Malaysian conglomerates

Total Solution Provider

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER

Financial Assistance - DISF

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER DOMESTIC INVESTMENT STRATEGIC FUND

Announced by the Prime Minister on 3rd of July 2012. Allocation of RM1 billion for the fund. Assistance in the form of matching grants (1:1) on reimbursable basis.

Harness & Leverage on Outsourcing opportunities

Intensify Technology Acquisition by Malaysian-owned companies

Accelerate the shift of Malaysian-owned companies in targeted industries

OBJECTIVE

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER DOMESTIC INVESTMENT STRATEGIC FUND

16%

48%

34%

1% 1%

Training

R&D

Capital

InternationalCertification

Licensing & Purchase ofNew/High Technology

RM99.3 million

RM78.8 million RM38.3 million

RM2.65 million

RM238,626,494 million

A total of 41 Projects

Electrical & Electronics

Transport Technology

Machinery & Equipment

Services

Wood-based

Life Sciences

As at 31 August 2013:

ICT

RM1.5 million

R&D

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER EGILIBITY

A subsidiary of an existing company operating in the relevant industry The parent company must have proven track record in the relevant industry

New Company Existing Company

A company which undertakes reinvestments in the form of expansion / modernisation / diversification The company must have the capability and proven track record in the relevant industry

New or Existing companies in the Manufacturing & Services Sector With Malaysian Equity of At Least 60%

Companies producing promoted products/engaged in promoted activities in priority sectors:

Aerospace Medical Devices Pharmaceuticals

Services including Design, R&D, testing, quality and standard certification, engineering services, logistics service providers

Other industries, on a case by case basis

Machinery & Equipment Advanced Electronics Renewable Energy

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER SCOPE OF DISF

Training of Malaysians Modernisation of facilities for Outsourcing activities

Licensing & Purchase of New Technology

R&D

International Standards & Certification

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER TRAINING OF MALAYSIAN

Courses such as product technology, process technology, equipment technology, equipment maintenance, quality control, tools & facilities and other training related to the approved project.

Motivational courses / workshops / seminars Language courses Management / Marketing courses Further study (Postgraduate; PHD / Masters) Training related to safety

Types of Training

Pre-operational / Operational Training On-the-job Training Validation D&D and R&D In-house Training (Internal, External or Overseas

Trainers) External Training (within Malaysia) Overseas training

Eligible Not Eligible

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER RESEARCH & DEVELOPMENT

Definition of R&D – systematic or intensive study carried out in the field of science & technology

Improvement of materials, devices, products, produce or processes Design, Development and Prototyping

Quality Control of products, or routine testing of materials, devices, products or produce Research in social sciences or humanities Routine data collection Efficiency surveys or management studies Market research or sales promotion

Eligible Not Eligible

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER Purchase of Machinery and Equipment for Modernisation and Upgrading of Facilities and Tools (Outsourcing activities)

Eligible Expenditure

Special machinery / equipment which is only used in the relevant industry. Special production machines can be considered if these are additional machines and not replacing existing machines; whereby these machines are required to penetrate new markets or industries Special machinery / equipment which is required by MNCs / Malaysian conglomerates for vendors to undertake outsourcing activities

Normal production machinery / equipment which is used in the general production line Normal testing machinery / equipment

Non-Eligible Expenditure

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER Licensing or Purchase of New/High Technology

The fund covers technology acquisition through:

Patent Design Blueprints Manufacturing/Services Know-How Technical support

Technology Licensing; and Acquisition of Technology

Eligible Cost of Licensing / Acquisition of Technology :

Note: Eligibility does not include costs of acquisition of trademark, copyright and proprietary information

MALAYSIA – YOUR MANUFACTURING SOLUTION PROVIDER Licensing or Purchase of New/High Technology

The fund covers technology acquisition through:

Patent Design Blueprints Manufacturing/Services Know-How Technical support

Technology Licensing; and Acquisition of Technology

Eligible Cost of Licensing / Acquisition of Technology :

Note: Eligibility does not include costs of acquisition of trademark, copyright and proprietary information

Introduction on MIDA

FUNCTIONS OF MIDA

Promotion Research &

Planning Follow-up/ Monitoring

Evaluation

• Foreign Direct Investment

• Domestic Investment

• Planning for Industrial Development

• Recommend policies and strategies on investment promotion and development

• Assist companies in the implementation and operation of their projects

• Facilitate institutions engaged in or connected with industrial development

• Advisory Services

• Manufacturing license

• Tax incentives for manufacturing and services activities

• Expatriate posts • Duty exemptions

MIDA ‘ONE STOP CENTER’ B

ase

d In

MID

A

Immigration Department

Royal Malaysian Customs

Department of Environment

Tenaga Nasional Berhad

Telekom Malaysia Berhad

Labour Department

Bas

ed

Ou

tsid

e M

IDA

Department of Occupational Safety and Health

Ministry of Finance

Ministry of Health

Ministry of Tourism

Ministry of Human Resource

Ministry of Higher Education

Multimedia Development Corp. (MDeC)

Construction Industry Development of Malaysia (CIDB)

24 Overseas Centre

San Jose

Los Angeles New York

Boston

Stockholm

Frankfurt

Munich

Milan Paris

London

Dubai

Mumbai

Guangzhou

Taipei

Shanghai

Seoul

Osaka

Tokyo

Sydney

Chicago

Houston

Bangkok

Singapore

Johannesburg

MIDA WORLDWIDE NETWORK

MIDA as a One Stop Agency : a) Approval of projects b) After- care services

Evaluation of applications for:

Manufacturing licence Tax incentives

Import duty exemptions on raw materials, components and machinery

Expatriate posts/work permits Regional establishments such as

Operational Headquarters, International Procurement Centres, etc

FACILITATION OF INVESTMENT FACILITATION OF INVESTMENT

Thank You.

Please visit us at: www.mida.gov.my penang@mida.gov.my