2019 INVESTMENT POLICY AND REGULATORY REVIEW Malaysia © 2020 The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. This volume is a product of the staff of the World Bank Group. The World Bank Group refers to the member institutions of the World Bank Group: The World Bank (International Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and non-commercial purposes. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Directors or Executive Directors of the respective institutions of the World Bank Group or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. 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Photo Credits: Shutterstock.com TABLE OF CONTENTS ACKNOWLEDGEMENTS 2 GLOSSARY 3 1. INTRODUCTION 5 2. OVERVIEW OF INVESTMENT POLICY FRAMEWORK 7 A. Domestic Legal Instruments Regulating Foreign Investment 7 B. International Legal Instruments Regulating Foreign Investment 9 C. Key Institutions for Investment Promotion 12 D. Foreign Investment Promotion Strategy 13 3. INVESTMENT ENTRY AND ESTABLISHMENT 15 4. INVESTMENT PROTECTION 20 5. INVESTMENT INCENTIVES 21 6. INVESTMENT LINKAGES 22 7. OUTWARD FOREIGN DIRECT INVESTMENT 22 8. RESPONSIBLE INVESTMENT 24 9. RECENT POLICIES ON NEW TECHNOLOGIES 24 10. CITY SPECIFIC REVIEW—KUALA LUMPUR 26 11. COMPETITION LAW & POLICY 27 A. Merger Control 27 B. Leniency Program 30 ENDNOTES 31 LIST OF REFERENCE MATERIALS 33 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA |1 ACKNOWLEDGEMENTS A team led by Priyanka Kher and Peter Kusek The report benefited from the comments of prepared this report. The team core members were these World Bank Group colleagues: Firas Raad, Maximilian Philip Eltgen and Azza Raslan. The Richard Record, Souleymane Coulibaly, Gerlin team would like to thank Caroline Freund (Global May Catangui, Tanja K. Goodwin, Sara Nyman, Director, Trade, Investment and Competitiveness), Mariana Iootty De Paiva Dias, Guilherme De Christine Zhenwei Qiang (Practice Manager, Aguiar Falco, Emma Verghese and Abhishek Investment Climate), Ivan Nimac (Global Lead, Saurav. The team would like to thank Nick Younes Investment Policy and Promotion), Georgiana Pop for editing, and Aichin Jones for providing design, (Global Lead, Competition Policy) and Graciela layout, and production services. Miralles Murciego (Senior Economist, Competition Policy) for their guidance. The report was prepared under the Analyzing Barriers to Investment Competitiveness Project, Legal research for the preparation of this report supported with funding from the Prosperity Fund was carried out by the international law firm of the United Kingdom. Baker McKenzie. | 2 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA GLOSSARY ACIA ASEAN Comprehensive Investment Agreement ASEAN Association of Southeast Asian Nations B2C Business-to-Consumer CMA Communications and Multimedia Act 1998 CPC Central Product Classification CSR Corporate Social Responsibility CPTPP Comprehensive and Progressive Agreement for Trans-Pacific Partnership CNII Critical National Information Infrastructure DFTZ Digital Free Trade Zone DTAA Double Taxation Avoidance Agreements DTS Distributive Trade Sector EAP East Asia Pacific area ECERDC East Coast Economic Region Development Council FDI Foreign Direct Investment FET Fair and Equitable Treatment FIC Foreign Investment Committee FTA Free Trade Agreement GATS General Agreement on Trade in Services GKL Greater Kuala Lumpur HDC Halal Industry Development ICSID International Centre for Settlement of Investment Disputes IIA International Investment Agreement IPRR Investment Policy and Regulatory Review IRDA Iskandar Regional Development Authority ISDS Investor-State Dispute Settlement LMW Licensed Manufacturing Warehouse MACA Malaysian Aviation Commission Act MATRADE Malaysia External Trade Development Corporation MAVCOM Malaysian Aviation Commission 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA |3 MCA Malaysian Competition Act MCMC Malaysian Communication and Multimedia Commission MOA Ministry of Agriculture and Agro-based Industry MOF Ministry of Finance MDEC Malaysia Digital Economy Corporation MDTCA Ministry of Domestic Trade and Consumer Affairs MIDA Malaysian Investment Development Authority MITI Ministry of International Trade and Industry MFN Most-Favored Nation MIC Middle-Income Country MPRC Malaysia Petroleum Resources Corporation MyCC Malaysian Competition Commission NBP National Biotechnology Policy NCI National Committee for Investment NCSP National Cyber Security Policy NEAC National Economic Action Council PDPA Personal Data Protection Act OFDI Outward Foreign Direct Investment QFLF Qualified Foreign Law Firm RCEP Regional Comprehensive Economic Partnership Agreement RECODA Regional Economic Corridor Development Authority RM Ringgit (currency) SEDIA Sabah Economic Development and Investment Authority SCM Agreement on Subsidies and Countervailing Measures SC Securities Commission Malaysia SDS Step Down Subsidiary SMEs Small and Medium Enterprises SLC Substantial Lessening of Competition SST Sales and Service Taxes TIP Treaty with Investment Provisions TRIMs Agreement on Trade-Related Investment Measures TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights UNCTAD United Nations Conference on Trade and Development WTO World Trade Organization | 4 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA 1. INTRODUCTION This Investment Policy and Regulatory Review on a review of currently applicable policies, laws (IPRR) presents information on the legal and and regulations. In some cases, consultations with regulatory frameworks governing foreign direct regulators were conducted to collect up to date investment (FDI) and competition that affect information. businesses and foreign investors in Malaysia. Since legal and regulatory frameworks are constantly The research was guided by a standardized evolving, a cut-off date was set for the research. questionnaire, covering a limited set of This country review therefore covers information topics, including foreign investment entry, available as of May 31, 2019, unless otherwise establishment, protection and select competition indicated in the review. IPRRs are available for the related aspects. The questionnaire focused on following middle-income countries (MICs): Brazil, de jure frameworks as generally applicable to a China, India, Indonesia, Malaysia, Mexico, Nigeria, foreign investor, not located in any specialized Thailand, Turkey, and Vietnam. or preferential regime (such as special economic zones). It primarily focused on national, economy- The research for preparing this IPRR was wide (rather than sector-specific) laws and undertaken by the international law firm Baker regulations. For the purpose of the research, it McKenzie, under the supervision of the World was assumed that the foreign investor is a private Bank Group. The research was primarily based multinational company with no equity interest or Figure 1. Overview of Topics Covered in IPRR Merger control Leniency n Key institutions for investment policy/rule n Remedies to limit n Extent of immunity on making, implemention and FDI promotion anticompetitive fines and damages n Key legal instruments effects of merger n Ease of admin n Transparency/consultation in laws and Main Policy & n Ease of admin in leniency regulations Legal Instruments procedures application and Institutions n Prohibited and Restricted Select Investment Entry Sectors n Equity ceiling Competition and n Minimum investment Policy Aspects Establishment requiremeent n FDI approval IPRR n R&D, local sourcing, n Schemes to increase Questionnaire employment, quantitative, local sourcing and geographic, export build capacity of local Other Areas suppliers (Linkages, OFDI, n Restrictions on OFDI Investment Responsible Protection n Measures on technology Investment, New Tech) n Expropriation n Transfer of currency Investment n Dispute Settlement Incentives n Fair administrative conduct n Source of Tax and financial incentives n Accessibility of tax and financial incentives 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA |5 management control by the government of its home investment promotion strategy; it also delineates country (that is, not state-owned enterprise). the country’s international investment legal framework, including the country’s commitments There are aspects that this IPRR does not cover. under the World Trade Organization (WTO) It is not a comprehensive review of the entire legal and select international investment agreements and regulatory framework affecting investment. (IIAs); Information presented is not exhaustive, but illustrative of the main topics and issues covered (for n Sections 3-6 cover the country’s policies and example, it does not exhaustively list all available domestic legal framework concerning different tax and financial incentives in the country). It does dimensions of the lifecycle of an investment: not present recommendations on reform areas. entry and establishment (Section 3), protection Notably, it does not capture de facto implementation (4), incentives (5) and linkages (6); of laws and regulations in the country. Given these limitations, information presented in this IPRR n Sections 7-9 explore emerging investment policy should be interpreted and used while keeping in view and regulatory areas—Section 7 considers the overall country context and realities. Further, outward FDI, Section 8 responsible investment, it contains information in summary form and is and Section 9 considers recent policies on new therefore intended for general guidance only. It is not technologies; intended to be a substitute for detailed legal research. n Section 10 focuses on city-specific investment This IPRR is organized as follows: policy and regulatory measures in the largest commercial center; and n Section 2 provides an overview of the country’s investment policy framework, including the n Section 11 covers select aspects of competition legal instruments regulating foreign investment, law and policy, specifically merger control and key institutions involved in investment leniency frameworks. promotion, as well as the country’s foreign | 6 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA 2. OVERVIEW OF INVESTMENT POLICY FRAMEWORK A. Domestic Legal Instruments Sector Specific Laws Regulating Foreign Investment Despite incremental liberalization, restrictions on foreign investments remain in certain FDI Law and Regulation sectors. These take the form of requirements Malaysia does not have a single, consolidated for Bumiputera/local equity participation and/or legislation that specifically regulates foreign foreign equity restrictions (collectively referred to investment in the country. Instead, regulations as Equity Conditions). and requirements affecting foreign investors are Restrictions on FDI are largely imposed under generally sector-specific and administered by the sector-specific laws, but additional ad hoc relevant government agency or sectoral regulator. restrictions may be imposed by regulators. For In addition, some of the main instruments regulating example, this is the case for Equity Conditions. foreign investment at the national economy-wide On the one hand, such conditions may be provided level are the Income Tax Act (1967), the Promotion by law (for example, where a piece of legislation of Investment Act (1986, as amended 2014), as specifically prescribes a minimum local equity well as the Malaysian Investment Development requirement or foreign equity restriction). On Authority (MIDA) Act (1967). the other hand, where a law does not prescribe Until 2012 foreign investments had been any Equity Conditions, the relevant regulator regulated by the Foreign Investment Committee may impose Equity Conditions on specific (FIC) Guidelines. These guidelines had been sectors through discretionary written guidance strongly influenced by the Government’s desire to or unwritten practices. Additionally, the relevant promote the participation of “Bumiputera” (that is, regulator may — based on the facts of each indigenous people) but were repealed following applicant — impose a different Equity Condition a wave of liberalization between 2009 and 2012 on a case-by-case basis (that is, an investor- (see Box 1). At the same time, the promotion of specific basis). If laws prescribe a different set of Bumiputera continues to play an important role in Equity Conditions, those stipulated in laws will Malaysia’s economic policies. prevail over any discretionary guidance. Non- Box 1. The Influence of the Promotion of Bumiputera on Malaysia’s Investment Policy In the 2000s, the objective to promote Bumiputera led the Government to create specific investment restrictions. The Malaysian Government has traditionally maintained economic policies with the overall aim of achieving a “balanced development” within a framework of rapid growth with equity as its primary thrust. In particular, one of the historical objectives of Malaysia’s 1990 National Development Policy and 2001 National Vision Policy was to achieve at least 30% Bumiputera participation in all industries by 2010. This resulted in the formation of the Foreign Investment Committee (FIC) and the introduction of the FIC Guidelines to limit foreign participation in acquisitions of interest, mergers and takeovers, and acquisition of properties in Malaysia. Between 2009 and 2012 the 30% Bumiputera equity requirement was removed for no less than 44 services sub-sectors. Some examples of these service sub-sectors that have been liberalized include private hospitals, medical and dental specialists, architectural, engineering, legal, accounting (including auditing) and taxation, courier services, telecommunications (except for the category of content application service provider license), education (including private universities, international schools, technical and vocational schools, and skills training centers), as well as departmental and specialty stores. Further, the FIC and the FIC Guidelines were, respectively, abolished and repealed. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA |7 compliance with Equity Conditions imposed under Consultation with Stakeholders discretionary guidance does not typically attract legal sanctions. Yet, it can be enforced through Stakeholder consultations are not mandatory in administrative actions. For instance, where the the law-making process, but some mechanisms intended operations of a company or business for stakeholder participation exist. Neither in Malaysia require certain operating licenses, the Malaysian Parliament nor the Government permits or approvals, the relevant regulator may are mandated to ensure public or stakeholder impose Equity Conditions for issuance of such consultations before a new bill is enacted into law. licenses, permits, or approvals. Equity Conditions However, the Standing Orders (the set of rules that are listed in Section 3 (Investment Entry and govern the conduct of members and proceedings) of Establishment). each of the two houses of Parliament do provide that: The dispersed sector-specific nature of FDI laws n Parties affected by a bill (public or private) can and regulations makes the legal framework be heard, upon petition, before any committee to complex and sometimes uncertain. For example, which the bill is referred; processes for review and approval of foreign n Private bills (that is, bills which deal with investment vary by the relevant ministry or matters of local or private concern, as opposed agency in-charge of the sector. The ministries and to matters of general public interest) that would governmental agencies often have discretionary benefit a particular person (group of persons), powers to approve specific investment projects. organization or association, must be published in the Federal Gazette and in at least one newspaper Public Access to Foreign Investment that is in circulation throughout the Federation, Laws and Policies at least one month before the day on which a motion for leave to introduce the bill is to be All principal laws, regulations and other legal moved; and instruments relating to foreign investment are publicly accessible. Under Article 66(5) of the n Every private bill and hybrid bill (that is, any Federal Constitution, a law cannot come into full other bill which in the opinion of the Yang Di- force and effect until it is published in the Federal Pertuan Agong appears to affect prejudicially Gazette. As such, all principal laws of Malaysia individual rights or interests) shall, after being (including laws relating to foreign investment) read a second time (though also possible before are accessible at the official portal of the Attorney the second reading), be referred to a Select General’s Chambers of Malaysia and the Federal Committee, before which any affected party Gazette. There is no specific website or portal of a who has previously presented a petition to the public institution that centralizes foreign investment House of Representatives may be heard upon laws in Malaysia. that petition. At the same time, not all policies are publicly While no law or policy mandates the Government available. Policies relating to foreign investment to ensure public or stakeholder consultation prior often take the form of guidelines or policy to formulating and implementing a new policy documents issued by the relevant sectoral regulator. or guidelines, in practice the Government has Where this is the case, the relevant guidelines or made progress toward overall good regulatory policy documents are usually published on the practice. For example, it has established a Good relevant sectoral regulator’s official website. For Regulatory Practices portal and is undertaking an example, the Distributive Trade Guidelines are initiative to comprehensively review its business published on the web portal of the Ministry of regulations, involving relevant stakeholders. Domestic Trade and Consumer Affairs. That said, Notably, certain sectoral regulators (particularly not all regulatory policies are publicly available and in the highly-regulated industries, such as the those that are may not always be up-to-date. Central Bank of Malaysia (Bank Negara Malaysia) that oversees the banking and financial services | 8 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA industry, and the Securities Commission Malaysia The Constitution has superiority over, regulates and (SC) that oversees the capital markets industry) restrains the institutions it creates. The Judiciary is generally carry out consultations with the relevant tasked with enforcing those restraints, for example stakeholders and public prior to the finalization and to uphold, among others: issuance of specific sector policies. n The rule of law — which, requires equality before the law and no exercise of arbitrary power; and Predictability and Stability in Policies and Rules n Constitutionalism — which requires that all There are no specific laws mandating Government actions comply with the Constitution predictability and stability in policies and rules, and do not destroy the democratic principles upon but these principles are to some degree ensured which it is based (such as fundamental rights); it through judicial review. The judiciary is entrusted also requires courts to interpret legislation on the with keeping every organ and institution of the assumption that Parliament would not intend to state within its legal boundary, and generally has legislate contrary to fundamental rights. the authority to strike down legislation passed by Parliament or decisions made by the Executive that B. International Legal Instruments is unconstitutional (for example, if the legislation Regulating Foreign Investment goes against principles of the Federal Constitution) or unlawful. Malaysia has undertaken legally binding international investment commitments through Judicial review is based on the principle a variety of international investment agreements of Constitutional supremacy. As opposed (IIAs) — signed at the bilateral, plurilateral and to Parliamentary supremacy, Constitutional multilateral level. These commitments mainly cover supremacy means that the Federal Constitution of entry and establishment conditions, protection, as Malaysia is the highest law in the country and that well as the legality of specific types of incentives (see every other law is subordinate to the Constitution. Table 1). It is important for Malaysia to reflect these Table 1. Malaysia’s International Investment Framework Agreement(s) as Basis of Commitments Type of Agreement Investment Policy Dimensions Covered WTO GATS Agreements Multilateral Entry and establishment WTO TRIMs Agreement Multilateral Entry and establishment, Incentives WTO SCM Agreement Multilateral Incentives WTO TRIPS Agreement Multilateral Protection Treaties with Investment Provisions Plurilateral or Bilateral May cover entry and establishment, (66 signed, 54 in force) protection, incentives Bilateral Investment Treaties Bilateral May cover entry and establishment, (26 signed, 21 in force) protection, incentives International Centre for Settlement of Multilateral Protection (Dispute settlement) Investment Disputes (ICSID) Convention Convention on the Recognition and Multilateral Protection (Dispute settlement) Enforcement of Foreign Arbitral Awards (New York Convention) IMF Articles of Agreement (Art. VIII Multilateral Protection Acceptance) Double Taxation Avoidance Agreements Bilateral Taxation (74 treaties in force) Source: World Bank Analysis 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA |9 commitments in its domestic legal framework to service providers from specific countries. Across ensure consistency as well as to monitor compliance. all sectors, it reserves the rights (i) to differentiate in regulating the movement of foreign semi-skilled Having been a member of the World Trade and unskilled workers into Malaysia and (ii) to Organization (WTO) since January 1, 1995, differentiate in limiting foreign equity or interests Malaysia has commitments under several WTO in companies and businesses. Agreements. Under the General Agreement on Trade in Services (GATS), Malaysia grants rights Under the WTO Agreement on Trade Related to services suppliers from other WTO member Investment Measures (TRIMs), Malaysia has countries. This includes services supplied through committed to not apply certain investment commercial presence (defined as establishment of measures that restrict or distort trade (local a territorial presence), in other words through FDI. content requirements, trade balancing These rights are granted through commitments requirements, foreign exchange restrictions undertaken in “schedules”. The “schedules” list and export restrictions). These measures are sectors being opened, the extent of market access prohibited both when the obligation for the being given in those sectors (for example, whether foreign investors is mandatory, and when it is tied there are any restrictions on foreign ownership), to obtaining an advantage (that is, an incentive). and any limitations on national treatment (whether Incentives are further regulated by the WTO some rights granted to local companies will not Agreement on Subsidies and Countervailing be granted to foreign companies). Malaysia has Measures (SCM), which among others prohibits made commitments on market access and national certain types of export subsidies. Under the treatment in 9 out of 12 services sectors in the WTO Agreement on Trade-Related Aspects of WTO classification1: (i) Business services, (ii) Intellectual Property Rights (TRIPS), foreign Communication services, (iii) Construction and investors’ intellectual property rights are related engineering services, (iv) Financial services, protected. In case of a violation of any of its WTO (v) Health related and social services, (vi) Tourism commitments, Malaysia may be sued under the and travel related services, (vii) Recreational, WTO dispute settlement mechanism. cultural and sporting services (viii), Transport services as well as (ix) Other services not included Malaysia has further entered into obligations elsewhere. In these 9 sectors, Malaysia has made through international investment agreements — partial commitments on market access and national 21 Bilateral Investment Treaties (BITs) and 54 treatment for specific services in 23 sub-sectors. Treaties with Investment Provisions (TIPs) are “Partial” means that although commitments have currently in force. The latter category comprises been made, there are still limitations/reservations, treaties that include obligations commonly which may differ in their restrictiveness. For found in BITs (for example, a preferential trade example, they may be more restrictive by limiting agreement with an investment chapter), or treaties the equity contribution of the foreign investor, or with limited investment related provisions. Table less restrictive by merely requiring foreign service 2 provides an overview of select Agreements: suppliers to become a member of a union chamber. Malaysia’s latest IIA (Australia-Malaysia FTA, Notably, any measure or special preference granted 2013), its IIA with the largest home country to Bumiputera or Bumiputera-status companies has measured by that country’s share in Malaysia’s total been reserved. FDI stock (ASEAN Comprehensive Investment Agreement, ACIA, 2012), as well as an IIA with In addition, under GATS every member is expansive regional coverage (ASEAN-China obligated to unconditionally extend to service Investment Agreement, 2010). The table shows suppliers of all other WTO members Most- that the main protection guarantees are provided Favored Nation (MFN) Treatment. However, in these agreements, although access to investor- Malaysia has made reservations in that regard. For State dispute settlement (ISDS) is not provided in business services, it reserves the ability to waive the FTA with Australia. Notably, under all three foreign content restrictions for advertising for IIAs Malaysia commits to liberalization, since the | 10 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA treaties provide for MFN status and selectively also On 8 March 2018, Malaysia signed the national treatment in the pre-establishment phase, Comprehensive and Progressive Agreement for but with a different scope and under reservations. Trans-Pacific Partnership (CPTPP). CPTPP is For example, ACIA only grants this right in one of the largest trade and investment agreements. specific sectors: manufacturing, agriculture, It covers 11 countries, a market of 500 million fishery, forestry, mining and quarrying, as well people, 13.5% of world GDP and 15.3% of world as services incidental to these. All reviewed IIAs trade. So far, Malaysia has not yet ratified the make reservations for measures that do not comply agreement. Notably, in a side letter with New with commitments. Zealand, Malaysia has decided, on a bilateral basis, only to give consent to investor state dispute settlement on a case-by-case basis. Table 2. Comparison of Malaysia’s Sample IIAs Largest Home Country Latest IIA (date of entry Expansive Regional IIA (% of total FDI stock): into force): Australia- Coverage IIA (highest ASEAN Comprehensive Malaysia FTA (2013) number of members): Investment Agreement ASEAN-China Investment (2012) (Singapore) Agreement (2010) Scope of Application Covers Pre-establishment Yes Yes Yes Exclusions from Scope Taxation measures (with Subsidies, taxation, services Taxation (except exceptions), government supplied in the exercise expropriation and procurement, subsidies or of governmental authority, transfers), government grants, services supplied in government procurement procurement, subsidies exercise of governmental (NT and MFN) or grants, services authority supplied in the exercise of governmental authority Standards of Treatment National Treatment (NT) Pre- and post-establishment Pre- and post-establishment Post-establishment Most-Favored-Nation Pre- and post-establishment Pre- and post-establishment Pre- and post- Treatment (MFN) establishment Fair and Equitable Yes Yes Yes Treatment (FET) Full Protection & Security Yes Yes Yes Expropriation Direct and indirect Direct and indirect Direct/indirect expropriation expropriation, payment of expropriation, payment of and payment of compensation compensation compensation Rights to Transfer Funds Yes Yes Yes Prohibition of Reference to TRIMs Reference to TRIMs TRIMs+ (Prohibiting Performance a larger number of Requirements performance requirements than TRIMs) Dispute Resolution State-State Dispute Yes Yes Yes Settlement Investor-State Dispute Yes No Yes, limited to post- Settlement establishment Source: Analysis based on IIAs obtained from the United Nations Conference on Trade and Development (UNCTAD) Investment Policy Hub 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 11 Moreover, Malaysia is involved in ongoing Acceptance of Art. VIII of the IMF Articles negotiations on several agreements. Most notably, of Agreement requires Malaysia to maintain it is negotiating the Regional Comprehensive current account convertibility, enabling Economic Partnership Agreement (RCEP) covering investors to transfer certain payments related ASEAN member states as well as large economies to their investments. Malaysia is also party to 74 in the East Asia Pacific (EAP) area such as China, Double Taxation Avoidance Agreements (DTAAs) Australia, and Japan. Further, in 2010 formal that are in force, influencing its ability to tax foreign negotiations were launched between Malaysia and investors and investments. the EU for a Free Trade Agreement (FTA). After several rounds of negotiations, the negotiations C. Key Institutions for Investment reached an impasse in 2012. However, both sides had agreed that negotiations will resume when a Promotion fresh mandate and/or flexibilities become available In Malaysia, foreign investment is regulated at a later date. at the sectoral level and investment promotion functions are generally vested in 32 national, Malaysia is further a member of treaties covering corridor and state government agencies or investment arbitration. It is a member of the sectoral regulators (see Figure 2.). The Malaysian New York Convention and the ICSID Convention, Investment Development Authority is de jure the facilitating the enforcement of arbitral awards. lead Investment Promotion Agency. Some of the It has been a respondent in three publicly known main institutions at the national as well as the sub- investor-State arbitrations, two of which have been national level are highlighted in Box 2. decided in its favor and one settled. Figure 2. Malaysia’s Investment Promotion Institutional Framework Ministry of Ministry of Ministry of Ministry of International Economic Prime Minister’s Agriculture & Agro- Communications Trade & Industry Affairs Office based Industry & Multimedia National Agency MIDA Federal Sector Bioeconomy Agencies MPRC HDC Corporation MDEC Federal Location Invest KL NCIA ECERDC IRDA SEDIA RECODA Agencies PKNEP UPEN Invest Invest Invest Invest NSIC Invest Perlis Perlis Kedah Perak Selangor Pahang N. Sembilan Melaka State Location Agencies PKNP Invest UPEN Invest UPEN MIETI MID Pahang Johor Kelantan Kelantan Terengganu Sarawak Sabah Johor Johor Petroleum Melaka Green Melaka Palm Oil Sabah O&G State Sector Development Agencies Biotech Center TechCorp BiotechCorp Industry Sabah Development Corp. Source: Bank Negara Malaysia-WBG Analysis | 12 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA Box 2. Select Key Institutions for Investment Promotion in Malaysia National Level Institutions Malaysian Investment Development Authority (MIDA) MIDA is the Malaysian Government’s principal agency responsible for the promotion of foreign investments in the manufacturing and services sectors (excluding financial and utilities). Established pursuant to the Malaysian Industrial Development Authority Act 1965, it is a statutory body under the purview of the Ministry of International Trade and Industry (MITI). MIDA assists investors in the form of direct consultation with relevant agencies, obtaining all necessary approvals for projects until they are operational, and facilitating site visits and investigations. Malaysia Digital Economy Corporation (MDEC) MDEC was established in 1996 to develop the Digital Economy in Malaysia. It is engaged in formulation of policies and coordination of agencies to enable success, workforce development and the creation of global champions in the digital economy. It oversees several programs, including MSC Malaysia, a platform that nurtures the growth of local tech companies while attracting both foreign and domestic direct investments. Bioeconomy Corporation Bioeconomy Corporation is the lead development agency for the bio-based industry in Malaysia, under the purview of Ministry of Agriculture and Agro-based Industry (MOA). It responsible for executing the objectives of the National Biotechnology Policy (NBP) and acts to identify value propositions in both R&D and commerce and to support these ventures via financial assistance and developmental services. It has mandate to actively promote foreign direct investments in bio-based industry. Halal Industry Development Corporation (HDC) Established in 2006, the Halal Industry Development Corporation coordinates the overall development of the Halal industry in Malaysia. Among its responsibilities are providing advisory services on opportunities throughout the halal market and value chain and promoting the Halal Malaysia brand worldwide. Sub-National Investment Promotion Agencies In addition to the national level agencies above, there are many sub-national investment promotion agencies operating under the purview of the relevant state governments. These sub-national agencies attract, facilitate, and support business investments in their respective states. They generally work independently with other governmental agencies, business chambers and industrial associations (including, among others, MIDA and the other sectoral regulators noted above) to encourage and promote investments in the respective federal territory or states. Some of the sub-national agencies include InvestKL Corporation Sdn Bhd; Invest Selangor Berhad; Invest Kedah Berhad; and Invest-in-Penang Berhad, to name a few. D. Foreign Investment Promotion various divisions under the Ministry of Economic Strategy Affairs for infrastructure and utilities, agriculture, and energy, and the strategic investment division Investment-related policy reforms in the country of the Ministry of Finance). Further, in February are driven by sector-specific governmental 2019 the Government established a new National agencies in respect of the industries/sectors Economic Action Council (NEAC) chaired by under their respective purview (such as the the Prime Minister. The NEAC’s mandate is to Investment Policy & Trade Facilitation division of encourage and stimulate sustainable economic the Ministry of International Trade and Industry, growth, equitable distribution of wealth, and further Bank Negara Malaysia for the financial sector, enhance wellbeing of people. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 13 There is no publicly available consolidated foreign priorities of economic policymaking more generally investment promotion strategy document issued are the 2030 Shared Prosperity Vision Economic by the Government. Rather, Malaysia’s foreign Blueprint released in October 2019, as well as annual investment promotion strategy can generally be drawn budget speeches. from the broader paper of the Mid-Term Review of the 11th Malaysia Plan (Mid-Term Review), the country’s There are several ongoing efforts that will shape five-year development plan toward realizing the goal Malaysia’s investment promotion strategy in of Vision 2020 and MIDA’s reports. The Mid-Term the future. Malaysia is currently in the process Review highlights strategies to promote economic of adopting the 12th Malaysia Plan, led by the growth and private investment and proposes concrete Ministry of Economic Affairs. Likewise, the 4th measures to promote domestic and foreign investment Industrial Master Plan is in development, led by the in Malaysia (see Box 3). Other sources highlighting Ministry of International Trade and Industry. Box 3. Mid-Term Review of the 11th Malaysia Plan—Strategies and Reform Proposals The Mid-Term Review highlights the following strategies to promote economic growth and private investment in the country that applies to both domestic and foreign investors: n Strengthening of sectoral growth and structural reforms through productivity improvements; increasing export capacity; improving market efficiency; and facilitating ease of doing business; n Acceleration of innovation and technology adoption through harnessing the Fourth Industrial Revolution; increasing technology adoption; aligning research and innovation; and enhancing capacity building; and n Provision of quality infrastructure through developing an integrated transport system; strengthening logistics and trade facilitation; improving digital infrastructure; improving water services; and sustaining energy supply. Furthermore, the Mid-Term Review proposes numerous measures to promote domestic and foreign investment in Malaysia. These measures include: n Comprehensive review of investment policies including incentives and tax structure; n Improving the management of all existing investment incentives to optimize resources; n Encouraging investment in Industry 4.0-related technology to reduce the gaps in the manufacturing sector; n Strengthening of the ecosystem for private investment to ensure quality private investment that creates more high-paying skilled jobs, particularly in the manufacturing and services sector; n Efforts to be undertaken to attract foreign direct investment in high value-added products and services, which utilize frontier technologies and promote technology transfer to local companies; n To create a supporting ecosystem between the six regions by, among others, enhancing the role of state economic development corporations and promoting interstate coordination in infrastructure provision; n Efforts to be encouraged to attract more investment, particularly for high impact programs and projects in the identified niche cluster activities, based on the six regional competitive advantages; n To upskill and reskill current workforce through embracing innovation and increasing the use of information technology in order to facilitate investment and promote upgrading of economic activities in all six regions; n To prioritize high quality investment in order to create more skilled jobs in the economy, and the list of industries that qualify for incentives under the Promotion of Investments Act 1986 will also be revised to attract such high-quality investments; and n Promotion of competitive cities (that is, Kuala Lumpur, Johor Bahru, Kuching and Kota Kinabalu) to accelerate economic growth. | 14 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA 3. INVESTMENT ENTRY AND ESTABLISHMENT Market Entry and Sectoral Limitations share capital of certain Malaysian companies. However, for every industry, there are sector- Foreign investment is strictly prohibited in specific regulations or written policies issued by certain sectors and sub-sectors (Prohibited the relevant ministry or government agencies Sectors), and limited in certain others through from time to time. In addition, there is unwritten “Equity Conditions” placing restrictions or guidance or policies stipulating equity conditions. equity caps on foreign participation (Restricted In such cases, investors are forced to rely on the Sectors). Apart from the Prohibited and Restricted latest known equity conditions based on unofficial Sectors, the general position is that 100% foreign confirmation by officers of the relevant sectoral equity is permitted in a sector or sub-sector. regulators (based on no names verbal enquiries). Sectors that permit 100% foreign participation As the Equity Conditions of certain sectors may include manufacturing, agro-processing, textiles, vary from time to time, it is prudent for investors chemicals, pharmaceuticals, IT and telecom to consult the relevant sectoral regulator prior to equipment, hotels and restaurants, computers and making an investment. software, among others. There is no centralized list of the Prohibited Prohibited and Restricted Sectors or Restricted Sectors—including applicable Table 3. lists the Prohibited and Restricted equity conditions. Further, there is no overarching Sectors based on various legislations, guidelines, legislation prohibiting foreign ownership of the and circulars issued by relevant regulators. Table 3. List of Major Prohibited and Restricted Sectors Prohibited Sectors Scope Wholesale and Retail Trade Supermarket (unless operated by a hypermarket operator), 24-hour convenience stores, provision shops, general vendors, news agent, miscellaneous goods store, fuel station with convenience store, medical hall Education Schools offering the Malaysian national curriculum Healthcare Certain healthcare service providers (for example, general medical clinic, general dental clinic, pathology laboratory) Professional Services Legal services firms (for example, full-scope local law firms) Certain SME sub-sectors Provision shop/general vendor/miscellaneous goods store (these may cover petty trading), as set out above n Permanent wet market store n Permanent pavement store n Textile shops n Restaurants (non--exclusive) n Bistros Agriculture, hunting, forestry and Foreign investment is subject to discretionary powers of the State and foreign fishing ownership of agricultural land is generally prohibited. Petroleum 70% cap depending on upstream products and services 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 15 Restricted Sectors Restrictions on Foreign Equity Electricity and water n 49% cap for electricity generation n 25% cap for companies listed on Bursa Securities Malaysia Berhad (the Malaysian Stock Exchange) Alternative energy 49% cap Construction Restrictions on foreign ownership differ depending on country of origin of the foreign shareholder: n 41% for Australia, New Zealand and Pakistan n 51% for India n 51% for ASEAN countries n 30% for other countries Wholesale and retail trade n 70% cap for hypermarket and supermarket operated by hypermarket operator n 30% cap for convenience stores Travel and tourism-related services n 30% cap for tourism training institute n Foreign equity is also capped in inbound and ticketing license of tour operating and travel agencies depending on the country of origin of the foreign shareholder: n 30% for non-ASEAN countries n 51-70% cap for ASEAN countries Transport 49% cap in provision of transportation to third parties using commercial vehicles (that is, License A type), and 30% cap for public bonded warehouse Telecommunications 30-70% cap for individual license (not applicable to Application Service Providers) Financial services and insurance n 70% cap for investment banks n 70% cap in existing Islamic banks (but 100% FDI is permitted in new Islamic banks, that is, greenfield investments) n 70% cap in insurance and takaful (that is, Islamic insurance) companies Real estate n 49.9% cap for ownership of certain residential units, properties build on Malay reserved land and properties allocated to Bumiputera interest n 70% cap (subject to EPU’s approval) for acquisition of real property resulting in the dilution of Bumiputera or Government interests in the real property via direct acquisition of property valued at RM 20 million and above or indirect acquisition of property through shares if (i) the transaction results in a change in control of the company owned by Bumiputera interest and/or Government agency; (ii) real property makes up more than 50% of the said company’s assets; and (iii) the real property is valued at more than RM 20 million Professional, scientific and technical Foreign equity is capped in accounting and audit services depending on the services country of origin of the foreign shareholder: n 30% cap for non-ASEAN countries n 51% cap for ASEAN countries Similarly, for taxation services, n 30% cap for non-ASEAN countries n 49% cap for ASEAN countries Health services n 70% cap for ambulance care center and nursing home n 49% cap for hospice, nursing home, and community mental health center Media and entertainment 30% cap for advertising Education 70% cap for private higher education Source: Analysis by Baker McKenzie based on country’s laws and regulations. Note: The table is based on a review of 32 specific sectors identified for the purpose of this research2. The list of sectors is therefore not exhaustive. | 16 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA Given the foreign equity caps in Restricted Sectors, Affairs (MDTCA). “Unregulated services” a joint venture between a foreign investor and a include, among others, general management local partner is required by default for foreign consulting services, marketing management participation in such sectors. consulting services, and other management related services. Restrictions on Non-Equity Contract Based Investments Forms of Establishment Non-equity contract-based investments Foreign individuals and companies can by foreign investors in certain sectors and generally hold any type of shares in a Malaysian subsectors are subject to special restrictions or incorporated company (for example, ordinary conditions. Some examples are: shares and preference shares). There are no restrictions on the establishment of a wholly n Outsourcing in the banking sector — The foreign-owned subsidiary so long as no licenses, outsourcing of critical functions by a licensed permits or passes are needed for the company to financial institution can only be made with the carry out its business activities in Malaysia. Where exemption (on a case by case basis) granted by licenses, permits and passes are required, there have Bank Negara and the appointment of a non- been instances where approvals have been obtained resident outsourcing service provider can only by companies subject to a condition of future partial be made with the approval of Bank Negara. divestment of equity to Malaysian shareholders. n Government procurement — To tender for Foreign investors cannot set up a partnership Government contracts, preference is generally in Malaysia unless they have permanent given to contractors and suppliers, whether residency in Malaysia. Generally, foreigners as a commercial intermediary or not, who are can establish a limited liability partnership (LLP) registered with the Treasury Department of entity in Malaysia. The LLP Act allows for the the Ministry of Finance (MOF). Depending registration of both local and foreign LLPs. It on the types of services or products that the does however require the LLP to appoint at least contractor or supplier proposes to supply to the one compliance officer from among its partners Government, the MOF will generally impose or persons qualified to act as company secretaries certain conditions, including, in certain instances, under the Companies Act 2016. Such a compliance minimum equity participation by Bumiputera officer must be a citizen or permanent resident of in such contractor or supplier. For services and Malaysia and must ordinarily reside in Malaysia. products that can be sourced easily in the local market, the MOF may require that only entities Foreign investors can also establish a branch that are majority Bumiputera-owned may supply or representative office in Malaysia, but these items to the Government. the registration of a branch office is at the discretion of the Companies Commission. n Franchising sector — A foreign franchisor is This Commission has statutory powers to impose required to obtain the approval of the Franchise conditions on such registration (that is, such registrar prior to undertaking any franchise conditions as are prescribed under the Companies activities in Malaysia. This can be contrasted Act). Foreign companies’ representative offices in with the position for local franchisors, who are Malaysia are regulated by MIDA. only subject to a registration requirement with the Franchise registrar in respect of any franchise activities. Minimum Paid-Up Capital Requirements In certain specific sectors and sub-sectors n Unregulated services sector — The provision minimum paid-up capital requirements are of unregulated services by foreign-owned imposed on companies with foreign ownership. Malaysian companies is subject to the approval For example, the minimum paid-up capital for: of the Ministry of Domestic Trade and Consumer 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 17 n Travel agency and tour operator business: directors and as key managerial personnel of local companies, where, for example: n foreign-owned inbound license holder: 1.5 million Ringgit (RM); n The company offers professional services. For example, under the Architects Act 1967, n locally-owned inbound license holder: RM an architectural consultancy practice in the 200,000 (City); RM 50,000 (Rural); form of a body corporate must have a board of directors comprising at least two thirds of n foreign-owned inbound & ticketing license architects registered with the Malaysian Board holder: RM 500,000–RM 1 million (depending of Architects. Given that expatriates may on country of origin of shareholder); face legal barriers (for example, recognized qualifications) to be registered as an architect n locally-owned inbound & ticketing license with the Malaysian Board of Architects, the holder: RM 200,000 (City); RM 150,000 (Rural) ability of an architectural consultancy practice to appoint expatriates to the board may be n Companies that wish to register with the restricted; or Expatriate Services Division (ESD) to hire expatriates: n The company holds regulatory licenses or approvals for which specific conditions n 100% local-owned: RM 250,000; are imposed by law or policy (written or n joint venture: RM 350,000; unwritten). For example, it is commonplace for regulatory licenses or approvals in the n 100% foreign-owned: RM 500,000; and oil and gas industry and distributive trade industry to impose minimum Bumiputera or n foreign owned companies (foreign equity at Malaysian participation on boards of directors, 51% and above) in the wholesale, retail and management and/or employee levels of the trade sectors: RM 1 million. company. The process of obtaining expatriate work Quantitative Limits permits is clearly defined and the Immigration There are generally no mandatory quantitative Department aims to process and approve limits on the number of foreign service employment pass applications within 5 working providers, enterprises or market players that days upon the submission of all required can operate in a given sector, except for certain documents. In practice however, applications are professional services sectors such as legal generally processed within 7 to 14 working days services. Under the current regime, a foreign law upon submission of all required documents. firm can be licensed as a qualified foreign law firm Companies are encouraged to train more (QFLF) in Malaysia, subject to certain conditions. Malaysians. The aim is that the employment However, only up to five QFLF licenses will be pattern at all levels of an organization in Malaysia granted. Further, ministries and certain regulators reflects the multi-racial composition of the country, in highly regulated industries (for example, Bank and that Malaysians are eventually trained and Negara and Securities Commission Malaysia) employed at all levels of employment. However, have broad powers to impose a moratorium on the where there is a shortage of trained Malaysians, issuance of operating licenses in circumstances companies are allowed to bring in expatriate they deem appropriate. personnel (that is, foreign persons) to take on high-level managerial roles, intermediate level Restrictions on Expatriate Appointments managerial and professional roles or technical and Local Hiring Requirements roles. The Immigration Act 1959/63 stipulates Special restrictions or conditions may be placed that an employment pass may only be issued if on the appointment of expatriates on boards of the Immigration Controller is satisfied that no persons resident in Malaysia are available to | 18 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA undertake employment of such position set out in There is no overarching legal requirement for the applicant’s contract of service. foreign investors to invest in local R&D in order to establish business in Malaysia. Local Sourcing and R&D Requirements Foreign Investment Approval There is no overarching legal requirement that subjects foreign investors to local sourcing There is no overarching FDI license or requirements in order to establish business approval requirement. However, since foreign in Malaysia. Local sourcing requirements may, investment regulation in Malaysia is sector- however, be imposed as a regulatory licensing/ specific, approval of sector-specific ministries, approval condition for investments. For example, government agencies and/or regulators may be under the Distributive Trade Sector (DTS) required. Equity conditions, minimum investment Guidelines, a distributive trade company with and other requirements are generally imposed as foreign involvement is required to, among others: conditions for the granting of approvals, licenses or registrations by the relevant ministries, government n Appoint Bumiputera director(s); agencies and/or sectoral regulator. There is no n Hire personnel at all levels including central website or database on which the key management to reflect the racial composition sectoral regulators are listed, though information of the Malaysian population; on such regulators is publicly available and easily accessible. A list of government ministries (which n Formulate clear policies and plans to assist are the ultimate policymakers for most economic Bumiputera participation in the distributive sectors and under which the sectoral regulators sit) trade sector; is available on the website of the Malaysia External Trade Development Corporation (MATRADE). n Increase the utilization of local airports and ports in the export and import of the goods; and Where Equity Conditions apply, the approval of the relevant sectoral regulator is generally n Utilize local companies for legal and other also required for any transfer of shares, change professional services available in Malaysia. in shareholders and/or activities relating to mergers and acquisitions. Foreign ownership in Restricted Sectors is therefore to some extent constrained, since transactions are subject to the prior approval of the sectoral regulator. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 19 4. 10. INVESTMENT PROTECTION Protection Against Expropriation Few restrictions or approval requirements apply to the inflow of funds to Malaysia or repatriation There is no domestic omnibus legislation that of proceeds from Malaysia (net of applicable governs expropriation generally in Malaysia, taxes and subject to standard compliances). and domestic sectoral laws generally do not Approval from Bank Negara Malaysia for inflow provide for a positive protection against (direct is required only in limited circumstances, such and indirect) expropriation. However, foreign as if a foreign shareholder provides a loan to the investors from certain countries enjoy protection Malaysian entity in excess of RM 1,000,000. against (direct and/or indirect) expropriation under international investment treaties. A number of Ringgit are generally not tradable outside Malaysia, these agreements include investor rights against and hence conversion of Ringgit outside Malaysia expropriation, requiring that for an expropriation to is prohibited. be lawful, it must be for a public purpose, following due process, non-discriminatory and the payment Dispute settlement mechanisms adequate, effective and prompt (see further Section 2.B—International Legal Instruments). A foreign investor in Malaysia can generally avail itself of dispute settlement through domestic courts, or domestic or international Restrictions on Inflow and Outflow of arbitration. Under administrative laws in Funds Malaysia, public authorities and officers are The transfer of funds between residents and required to exercise their powers fairly and non-residents is subject to the requirements reasonably, in good faith, and for proper purpose. and restrictions under the Foreign Exchange Although there is no overarching law or legal Administration Notices issued by Bank Negara mechanism giving investors the right to be heard Malaysia (FEA Notice(s)). The FEA Notices set before a Government decision, it is common out the circumstances in which specific approval of for state laws or policy documents to impose Bank Negara is required to remit funds to and from on relevant authorities duties to consult with or Malaysia. Bank Negara also has broad powers to give notice to interested parties before making a issue directions (for example, levies and charges on decision. transactions) to safeguard the balance of payments position and the value of the local currency. | 20 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA 5. INVESTMENT INCENTIVES Generally, various tax incentives are available available on the online incentive portal maintained either (a) under law (for example the Promotion by MIDA. However, depending on the incentive, of Investment Act or in the Income Tax Act) or eligibility criteria may be vague, subjective, or involve (b) as a matter of policy (usually included in the complex judgments such as the preparation of technical Annual Budget speech). Key tax incentives available notes on data analysis or determining “significant in Malaysia are either pioneer status (that is, income business spending”. In addition, some schemes may tax exemption) or investment tax allowance (that is, have multiple (up to 20) criteria, with no sliding scale income tax exemption equivalent to qualifying capital effect of non-compliance — an investor may lose the expenditure incurred). Tax incentives in the form of whole incentive as a result of failing just one criterion. partial reduction of the corporate income tax rate, sales and services tax exemption and/or remission, The application for tax and financial incentives are and customs duty exemption and remission are also generally considered on a case-by-case basis and available. On the other hand, financial incentives such are not automatically granted upon fulfilment of as matching or conditional cash grants, public sector the express eligibility criteria. The approval process is equity participation, reduced rates on land, utilities, and generally not stated in any law, regulation or notification transportation are generally not governed by specific and varies from one regulatory authority to another. laws. That said, certain sales and service tax exemptions are generally automatically granted to the applicant MIDA maintains an online portal that serves as and the Royal Malaysian Customs Department will a repository of key Malaysian tax and financial typically conduct a post-approval audit to ensure that incentives available to foreign investors. Typically, the applicant enjoying the exemptions does indeed MIDA updates the portal in the fourth quarter, which satisfy the relevant exemption criteria. There is also no may result in certain changes in the substance and/ centralized registry of recipients of Malaysian tax and or operational requirements in relation to tax and financial incentives. financial incentives in Malaysia. Certain tax or financial incentives are contingent The objectives of specific incentives introduced by on local content or local sourcing requirements. the Malaysian Government are generally outlined A key example of such an incentive lies in the in the annual Malaysian budget announcements. context of the automotive industry in Malaysia, The tax and financial incentives made available by the where excise duty reductions are made available to Malaysian Government are based upon the policy of automotive manufacturers based on the percentage the prevailing government. of local components and parts used in the assembly of motor vehicles. The policy on this local content Eligibility Criteria and Approval Process credit incentive is only made available to automotive manufacturers seeking to invest in Malaysia. The National Committee for Investment (NCI) makes decisions on incentives. There are 2 Certain tax or financial incentives are contingent committees. NCI1 approves bespoke or customized on export requirements. An example includes the incentives. NCI2 approves standard incentives. licensed manufacturing warehouse (LMW) status that grant customs duty (and consequently sales tax) The granting of tax and financial incentives by suspension facilities to the LMW status holder on the Malaysian Government to foreign investors imported raw materials subject to fulfilment of are generally contingent upon satisfaction of the the minimum 80% export requirement. Another relevant eligibility criteria and demonstration of a example is the principal hub incentive that may business case for the incentive to be granted. The include a condition that the incentive holder exports eligibility criteria for tax incentives are typically set out a certain percentage of its finished goods in order to either in the relevant legislations or policy documents continue to qualify for the relevant tax incentives. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 21 6. INVESTMENT LINKAGES For the purposes of this section, research was However, there are also incentives in place that focused on the availability of incentive schemes may discourage foreign investors from increasing to increase local sourcing, technology transfer local sourcing. For example, customs duty and and measures to improve information exchange sales tax exemptions may be available on imports, between foreign investors and domestic suppliers. whereas Sales and Service Taxes (SST) may need There are incentive schemes in place to encourage to be paid when buying from local suppliers. foreign investors to increase local sourcing, build capacity of local suppliers (or potential local The Malaysian External Trade Development suppliers) to help them meet strict procurement Corporation maintains a general list of requirements, and to increase technology transfer. Malaysian suppliers and service providers on An example is the incentive in the context of the its website. The aim is to improve information automotive industry in Malaysia described in the exchange between foreign investors and domestic section above. suppliers. Several investment promotion agencies are also involved in such activities. 7. OUTWARD FOREIGN DIRECT INVESTMENT For this section, research was focused on n of any amount using foreign currency funds, whether there are any legal instruments sourced from: specifically covering outward investment and if there are, whether they impose any restrictions ‑ abroad (other than proceeds from export of on outward investment. In Malaysia, both state- goods); owned and private sector enterprises can undertake investments abroad but may be subject to advance ‑ a non-resident (other than from foreign approvals. Malaysian law distinguishes between currency borrowing); or residents with and without domestic Ringgit borrowing for purposes of determining thresholds ‑ foreign currency borrowing from a licensed that require advance approvals from Bank Negara onshore bank for direct investment abroad; Malaysia for outward investment. These thresholds n up to the amount of approved foreign have been incrementally relaxed over time and are currency borrowing from a non-resident, as listed in FEA Notice 3: permitted under the FEA Notices; n a Malaysian resident entity without any n up to the amount of the proceeds sourced domestic Ringgit borrowing is allowed to undertake investment abroad of any amount; from the listing of shares through an initial and public offering on the Main Market of Bursa Securities Malaysia Berhad (the Malaysian n a Malaysian resident entity with any domestic stock exchange); or Ringgit borrowing is allowed to undertake investment abroad: | 22 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA n up to RM 50 million equivalent in aggregate For purposes of the thresholds noted above, per calendar year (on a corporate group basis) using foreign currency funds, sourced from: n the Malaysian resident entity is deemed to have a domestic Ringgit borrowing if it or any other ‑ conversion of Ringgit Malaysia; resident entity within its group with parent- subsidiary relationships has a domestic Ringgit n foreign currency borrowing from a licensed borrowing; onshore bank (for purposes other than a direct investment abroad); n “RM 50,000,000 equivalent in aggregate” refers to the investment abroad by the Malaysian ‑ transfer from the Malaysian resident resident entity and other resident entities within entity’s Trade Foreign Currency Account its group with parent-subsidiary relationships; (as prescribed under the FEA Notices), and including proceeds from export of goods; n “parent-subsidiary” relationship means direct or or indirect relationship where a resident entity ‑ the swapping of financial assets. is: (i) a holding entity or ultimate holding entity of another resident entity; (ii) a subsidiary of Any investment abroad by a Malaysian resident another resident entity; or (iii) a subsidiary of a entity exceeding the threshold above would require non-resident entity, where the ultimate holding the prior approval of Bank Negara. entity is a resident entity. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 23 8. RESPONSIBLE INVESTMENT For this section, research was focused on modifications in the process line to minimize waste whether there are any measures within the generation, seeing pollution prevention as part of country’s investment legislation that are the production process, and focusing on recycling specifically targeted to ensure responsible options. Additionally, the Environmental Quality investment. Malaysia has no specific measures Act 1974 and its accompanying regulations call on responsible investment in the country’s for environmental impact assessment, project foreign investment policy and legal framework. siting evaluation, pollution control assessment, It has undertaken several measures in its broader monitoring, and self-enforcement. Industrial legal framework to preserve the environment, activities are required to obtain approvals from the protect health and to ensure products produced Director-General of Environmental Quality prior comply with national and international standards. to project implementation. In particular, the Malaysian Government has established the legal and institutional framework The Malaysian Government has also issued for environmental protection through the National the Malaysian Standards, which is a technical Policy on the Environment. Investors are document that specifies the minimum encouraged to consider the environmental factors requirements of quality and safety. However, the during the early stages of their project planning. application of the Malaysian Standards is voluntary. Aspects of pollution control include possible 9. RECENT POLICIES ON NEW TECHNOLOGIES This section considers Malaysia’s recent policy n Malaysia has passed the National Industry measures on new technologies (that may affect 4.0 Policy (Industry4WRD). Industry4WRD is both domestic and foreign investors). Globally, a national policy to drive digital transformation policy measures on new technologies tend to focus of the manufacturing and related services on the enabling (sectoral) regulatory framework, sectors in Malaysia with the goal of becoming as well as on incentives, digital standards, and the primary destination for high-tech industry clusters. At the same time, countries have taken and a total solutions provider for advanced measures that highlight their changing approaches technology. The policy outlines Malaysia’s to national security. Other emerging policies vision for the manufacturing sector in the next that, though not directly related to investment, 10 years, which is for the nation to become the as a matter of fact impact investments, are data strategic partner for smart manufacturing and localization requirements as well as rules and related services in Asia Pacific. To achieve this regulations concerning the treatment and use of goal, Industry4WRD calls for tax-incentives, digitized information. efficient digital infrastructure, established regulatory framework to increase industry Malaysia has taken several measures focusing adoption, investment in future skilled labor, on the development of new technologies: and increased access to smart technologies. | 24 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA n In 2016, Malaysia became the first country n Thrust 7: cyber security emergency readiness; in the world to establish a Digital Free Trade and Zone (DFTZ). The DFTZ is a special trade zone that promotes the growth of e-commerce by n Thrust 8: international cooperation providing a state-of-the-art platform for small and medium and other enterprises (SMEs). Jack n On April 8, 2019, the lower house of Ma, CEO of Alibaba, the largest e-commerce Parliament passed the Service Tax Bill 2019, company in the world, has committed major which will impose a service tax on digital investments to the DFTZ. services that are imported by consumers into Malaysia under a Business-to-Consumer n In 2019, Malaysia introduced a National (B2C) regime. The Bill needs to be passed Cyber Security Policy (NCSP). In response by the upper house of Parliament and receive to increasing cybersecurity threats and rapidly the Royal Assent before becoming law. Under growing connectivity-based technology, this new regime, a service tax of 6% will be NCSP addresses risks to the Critical National imposed on any digital service provided by a Information Infrastructure (CNII) concerning foreign service provider. the networked information systems of ten sectors. These sectors are defense and Data Localization security, transportation, banking and finance, health services, emergency services, energy, There are generally no data localization information and communications, Government, requirements under Malaysian law, except in food and agricultural, and water. respect of customer data in specific sectors, that is, electronic money and payment systems There are eight “policy thrusts” under the NCSP services. To regulate these services, Bank Negara to ensure effectiveness of cybersecurity controls in 2018 issued the Interoperable Credit Transfer over vital assets. These policy thrusts are to Framework. This Framework requires approved be implemented by the relevant government issuers of designated instruments and registered agencies and ministries to ensure effective merchant acquirers to ensure their customer data governance and a proper regulatory framework. in relation to credit transfer services are stored securely in Malaysia. n Thrust 1: effective governance through centralizing coordination of national cyber The processing (including collection and use) security initiatives; of personal data in the context of commercial transactions is regulated under the Personal Thrust n 2: legislative and regulatory Data Protection Act 2010 (PDPA) in Malaysia. framework that includes reviewing and “Personal data” means any information that enhancing cyber laws; relates directly or indirectly to an individual, who is identified or identifiable from the information Thrust n 3: cyber security technology or from that and other information in possession framework; of the data user. While the PDPA does not impose data localization requirements, personal data of n Thrust 4: culture of security and capacity a data subject may not be transferred to a place building; outside Malaysia unless the destination is a place n Thrust 5: research and development toward specified by the Minister of Communications self-reliance; and Multimedia of Malaysia and published in the Federal Gazette. To date, no such place has n Thrust 6: compliance and enforcement; been specified. That said, personal data can be transferred outside of Malaysia if, among others, the data subjects consent to the transfer. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 25 10. CITY SPECIFIC REVIEW—KUALA LUMPUR In Malaysia, foreign investment policies and The ‘Greater Kuala Lumpur’ (GKL) area has strategies are generally shaped and driven been a key region for economic development by the Federal Government through various and investment promotion in recent years. GKL ministries, government agencies and sectoral is an area covering 10 municipalities surrounding regulators. The sub-national investment promotion KL, including Putrajaya (one of the other two agencies, under the purview of the respective State federal territories), Shah Alam, Petaling Jaya and Governments, generally work with the federal Klang. To foster its development, the Malaysian ministries, government agencies and sectoral Government established InvestKL Corporation regulators to encourage and promote investments Sdn. Bhd. (InvestKL), a government investment in their respective territory or state. promotion agency under the purview of MITI mandated to attract Fortune 500 and Forbes 2000- All investment-related federal legislation and type multinational companies to establish their policies, including investment incentives, apply regional hubs and undertake regional activities to Kuala Lumpur (KL). There are no city-specific in GKL. InvestKL is responsible for providing foreign investment policies/strategies that are investment-related services to investors in applicable to foreign investments in KL. There is GKL, including introducing investors to various also no conflict between national and subnational specialized business hubs in the region, providing (city) level laws, because KL is one of three federal post-investment services and recommending territories (that is, Kuala Lumpur, Putrajaya and prime investment locations. InvestKL facilitates Labuan) that are generally subject to federal investments and does not have powers or the legislation. functions of making investment-related policies. | 26 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA 11. COMPETITION LAW & POLICY For the purposes of this section, research n acquisition by one enterprise of the assets, was focused on merger control and leniency or a substantial part of the assets, of another frameworks in the country. The primary law enterprise which places the acquiring enterprise governing competition in Malaysia is the Malaysian in a position to replace or substantially replace Competition Act 2010 (MCA). The MCA provides the selling enterprise in the business; or for prohibitions of anti-competitive agreements and abuse of dominant position. It does not specifically n a joint venture created to perform, on a lasting regulate mergers. basis, all the functions of an autonomous economic entity. The Malaysian Competition Commission (MyCC), established in 2011, is the main body in-charge of The MACA provides that merger control will not implementing competition law and policy in the be applicable in certain circumstances, including country. if control is acquired by an enterprise the normal activities of which include the carrying out of transactions and dealings in securities for its own A. Merger Control account or for the account of others. At present, merger control in Malaysia is only In 2014, the MCMC had indicated that applicable to mergers in the aviation service it will regulate merger activities in the market pursuant to the Malaysian Aviation communications and multimedia industry if the Commission Act 2015 (MACA), administered merger/acquisition has the purpose or effect of by the Malaysian Aviation Commission substantially lessening competition in a relevant (MAVCOM), and in the communications market. However, unlike the MACA, there is no and multimedia sectors, administered by the formal merger control regime provided under the Malaysian Communication and Multimedia Communications and Multimedia Act 1998 (CMA) Commission (MCMC). The two Commissions and therefore there is no merger notification have published several guidelines on mergers, procedure as such. Instead, the MCMC has including the following: adopted Guidelines on Mergers and Acquisitions n MAVCOM’s Guidelines on Substantive issued on May 17, 2019, prescribing a voluntary Assessment of Mergers; Guidelines on process through which parties undertaking relevant Notification and Application Procedure for transactions in the sector may choose to reduce their Anticipated Merger or Merger; and Guidelines risk by proactively submitting their transaction to on Aviation Service Market Definition. the MCMC prior to completion, to obtain its view on the competitive effect of their transactions. If n MCMC’s Guidelines on Substantial Lessening parties chose to proceed without such filing, they of Competition; Guidelines on Mergers and bear the risk of an objection by the MCMC, which Acquisitions; and Guidelines on Authorization may result in enforcement actions under the CMA. of Conduct. MCMC Guidelines allow applicants to request a confidential assessment and/or an authorization Pursuant to the MACA, a merger includes: of the transaction in question. Application for n merger of two or more enterprises, previously voluntary assessment and authorization of a independent of one another; M&A may be submitted simultaneously or an authorization request may be submitted without n acquisition of direct or indirect control of the applying for the assessment first. Entities that are whole, or part of, one or more enterprises by likely to have a post-transaction market share of one or more persons or enterprises; 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 27 40% or more are encouraged to seek assessment Similarly, MCMC may also require parties to and/or authorization. The MCMC may authorize submit undertakings to address competition the transaction in case there is national interest that concerns of transactions. Examples under the outweigh potential negative effects on competition MCMC Guidelines include both structural and in the relevant market. behavioral undertakings. MCMC may also seek to impose an interim or interlocutory injunction under Pre-notification Meetings its Notice of Objection. The current merger control regime under File Access and Third Party Intervention MACA does not provide for any process for a merger party to consult or seek guidance from While access to file is not specifically established MAVCOM on whether a merger would infringe in the sectoral guidelines, public consultations the Act or should be notified to MAVCOM. will enable market operators to express their A merging party is expected to carry out its own views to MAVCOM and MCMC. On the one assessment to determine whether a merger may hand, MAVCOM will publish a summary of the lead to a substantial lessening of competition (SLC) merger notification for public consultation prior effect on any aviation service market, and hence to commencement of its assessment and/or its infringe the MACA. proposed decision for public consultation before issuing its final decision. MAVCOM will take In telecommunications, the parties have the into consideration submitted feedback within a option to reach out to the MCMC to request specified period from the date of the publication a ‘confidential assessment’ of the transaction. of the summary or proposed decision. On the other Although this constitutes a formal process, it allows hand, MCMC assessment would typically involve parties to obtain information on the competitive public consultation with suppliers, competitors effects of a transaction and whether notification and customers, unless confidentiality needs to be would be advisable. preserved. In those cases, neither an announcement nor public consultation will take place. Under Fast Track Procedure and Information MAVCOM guidelines, parties may also request to Requests redact the final decision of the regulator in order to protect confidential information. There is no fast track notification procedure for mergers under the existing sectoral guidelines. Instead, M&A in telecommunication will undergo Substantive Assessment a 2-phase procedure with fewer problematic In assessing whether a merger would result transactions being cleared in Phase 1 within an or is expected to result in an SLC effect in estimated timeframe of 30 days. MAVCOM, on any aviation service market, MAVCOM will the other hand, has no formal deadlines to make a carry out the SLC test, which entails three decision in relation to a merger application. steps (outlined in the MAVCOM Guidelines on Substantive Assessment of Mergers). First, Remedies MAVCOM defines the relevant aviation service market. Second, MAVCOM develops a theory If MAVCOM issues a proposed decision of of harm to identify the possible harm and effects infringement upon completion of merger review, on competition in a relevant aviation service the merger parties are given an opportunity to market arising from a merger. Third, MAVCOM make a written representation to MAVCOM. In develops a counterfactual scenario to compare the written representation, an applicant or a merger conditions and the degree of competition in the party may propose certain conditions to address any relevant aviation service market in the absence competition concern arising from the anticipated of such a merger. merger. MAVCOM may accept such conditions and/or impose certain remedies, either structural The MCMC also adopts an SLC test in and behavioral, or both. the communications market. The MCMC | 28 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA Guidelines on Mergers and Acquisitions also of the CMA, including the imposition of a financial stipulate three steps for its assessment: (1) penalty or imprisonment. defining market, (2) defining context (dominant or not: to determine whether to pursue analysis Judicial appeals to MAVCOM and MCMC final under section 133 or section 139), and (3) assess decisions are possible. Pursuant to section 120 the transaction including identifying whether of the CMA, parties to the transaction may apply a conduct substantially lessens competition in to the Appeal Tribunal for review of MCMC’s a communications market and counterfactual decision. However, this can only be undertaken after analysis. Additionally, the MCMC may authorize exhausting all other remedies provided for under a conduct where the benefits arising from said the CMA. Determinations made by the MCMC that conduct are substantial and in line with the national a party to a transaction is in a dominant position policy objectives. Under the Guidelines on are not subject to appeal. In the aviation sector, Authorization of Conduct, the MCMC undertakes there is no avenue for the decisions of MAVCOM a cost-benefit analysis, where the MCMC will to be appealed within the administration. However, analyze whether there is any substantial national an appeal can be brought to the High Court within interest as per Subsection 3 (2) of the CMA. In three months of the date of the decision. any case, authorization is not possible for per se prohibited conduct, namely fixing rates, market Publicity and Deadlines for Merger allocation and refusal to deal (boycott) of supplier Decisions or competitor. MAVCOM aims to publish all its decisions, but there are no published decisions yet. Per Penalties and Appeals the MAVCOM Guidelines on Notification and While merger notification is voluntary both in Application Procedure for an Anticipated Merger the aviation and the telecommunications sectors, or a Merger, once decisions are published, they penalties can nonetheless be imposed based on will contain the facts on which MAVCOM bases its lack of compliance. In aviation, for instance, finding and the reasons for such finding. parties can make an application to MAVCOM MCMC, in the other hand, outlines a number either before or after closing the transaction. If of circumstances that may limit the publicity MAVCOM initiates an investigation into the merger of decisions. Publication of information received transaction and it finds the merger to have an SLC following MCMC should be made available to the effect, MAVCOM can require the modification or public. However, this obligation may be toned down dissolution of the merger. Additionally, MAVCOM by certain conditions such as MCMC considering can impose a financial penalty not to exceed 10% that publication to be consistent with the objects of of the worldwide turnover of the enterprise over the the CMA, potential impact on commercial interests period during which the infringement occurred. of the parties, and confidentiality concerns. According to MACA Section 61, MAVCOM In terms of deadlines for merger decisions, while may not impose a fine on an enterprise MCMC guidelines impose pre-defined terms, for not implementing the remedies and/or MAVCOM has no such obligations. MCMC commitments imposed by it. However, such Guidelines provide an indicative timeframe for remedies/commitments are enforceable by bringing completion of Phase 1 set at 30 days from the date proceedings before the High Court. If the High of commencement and Phase 2 set at 120 days from Court finds that the party has failed to comply with the date of commencement. These timelines may be the decision, the High Court can make an order extended by the MCMC at its absolute discretion. to require the party to comply with the decision. However, there are no statutory or formal deadlines for Failure to comply with the High Court is punishable MAVCOM to make a decision in relation to a merger as a contempt of court. application. The duration for the assessment of an In telecommunications, the MCMC may seek to application will be determined on a case-by-case basis enforce any penalties as per Chapter 2 of Part VI for both the first phase review and second phase review. 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 29 B. Leniency Program Confidentiality MyCC’s leniency program is set out in Section 41 of MyCC requires the leniency applicant not to the Malaysian Competition Act, and in Guidelines disclose to anyone that the applicant has made an on Leniency Regime published by MyCC. application for leniency. Therefore, confidentiality including the identity of the applicant will be The leniency regime under the MCA is only maintained before starting — and during — the available with respect to cartels and allows for a investigation. The grant of unconditional leniency reduction of up to 100% of the penalties. This is not will be made in the infringement decision (if any); available to certain infringers such as an enterprise hence, the identity of the leniency applicant will that initiated the cartel. There is no criminal liability likely be disclosed in MyCC’s decision or after the for an infringement of the prohibition under the decision is rendered. MCA. There is also no individual liability for an infringement of the prohibition. Any leniency There is no concept of leniency statement. In all granted will not protect the successful applicant leniency applications, the applicants are required to from other legal consequences, including civil enter into a written conditional leniency agreement proceedings initiated by an aggrieved private with MyCC that contains all the conditions that the person who has suffered loss or damage directly applicant is required to satisfy in order to receive caused by the infringement. The leniency regime (unconditional) leniency. Whether the terms of the covers subsequent applicants. Among the factors written conditional leniency agreement will be kept that may be taken into consideration in determining confidential will largely depend on the terms of that the amount of the reduction is reporting another agreement (or failing which, confidentiality will cartel or competition infringement. The MyCC’s depend on common law principles). leniency decision is final with no appeal available. Cooperation with other competition Marker System authorities Per the MyCC Guidelines on Leniency Regime, The current leniency regime does not expressly to request a marker, the applicant must provide provide for cooperation with other competition the name of the enterprise(s) that will be authorities. covered by the leniency and sufficient details to identify the infringement. Moreover, the leniency application must be made in writing along with supporting documentation. MyCC cannot use any self-incriminatory information obtained by leniency applications against any unsuccessful leniency applicant. A marker will remain valid for 30 days from the date it was granted. | 30 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA ENDNOTES 1 The WTO services sectoral classification list Services are categorized into 12 sectors: (W/120) is a comprehensive list of services sectors and sub-sectors covered under the GATS. It was 1. Business services compiled by the WTO in July 1991 and its purpose 2. Communication services was to facilitate the Uruguay Round negotiations, ensuring cross-country comparability and 3. Construction and related engineering services consistency of the commitments undertaken. The 160 sub-sectors are defined as aggregate 4. Distribution services of the more detailed categories contained in 5. Educational services the United Nations provisional Central Product Classification (CPC). The list can be accessed 6. Environmental services under the following link: http://www.wto.org/ english/tratop_e/serv_e/mtn_gns_w_120_e.doc. 7. Financial services 8. Health related and social services 9. Tourism and travel related services 10. Recreational, cultural and sporting services 11. Transport services 12. Other services not included elsewhere 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 31 2 For the purposes of this research, the following 32 sectors have been identified. This is not an exhaustive list of all sectors of the economy. Primary: Services: 1. Agriculture, Hunting, Forestry, and Fishing 18. Electricity, Gas, and Water 2. Mining, Quarrying, and Petroleum 19. Alternative Energy 20. Construction Manufacturing: 21. Wholesale and Retail Trade 3. Agroprocessing, Food Products, and Beverages 22. Hotels and Restaurants 4. Textiles, Apparel, and Leather 23. Other Travel and Tourism-related Services 5. Chemicals and Chemical Products 24. Logistics, Transport, and Storage 6. Rubber 25. Telecommunications 7. Plastic Products 26. Computer and Software Services 8. Pharmaceuticals, Biotechnology, and Medical Devices 27. Financial Services including Insurance 9. Metals and metal products 28. Real Estate 10. Non-metal mineral products 29. Business Services 11. Wood and wood products (other than Furniture) 30. Professional, Scientific and Technical Services (Engineering, Architecture, and 12. Furniture so on) 13. Paper and paper products 31. Health Services 14. Printing and publishing 32. Media and Entertainment 15. Automobiles, Other Motor Vehicles, and Transport Equipment 16. Information Technology and Telecommunications Equipment 17. Machinery and Electrical and Electronic Equipment and Components | 32 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA LIST OF REFERENCE MATERIALS Primary Sources 25. New Economic Model for Malaysia 1. Federal Constitution 1957 26. Mid Term Review of the 11th Malaysia Plan 2. Land Acquisition Act 1960 27. National Industry 4.0 Policy 3. Financial Services Act 2013 28. National Cyber Security Policy 4. Malaysian Industrial Development Authority 29. Department of Environment National Policy (Incorporation) Act 1965 on the Environment 5. Ministerial Functions Act 1969 30. Malaysian Standards Online 6. Petroleum Development Act 1974 31. Halsbury’s Laws of Malaysia, Chapter 80 (Administrative Law) 7. Communications and Multimedia Act 1998 32. Guidelines on Foreign Participation in the 8. Energy Commission Act 2001 Distributive Trade Services Malaysia 9. Water Services Industry (Licensing) 33. Guidelines on Application for Tourism Regulations 2007 Training Institute (ILP) Licence (updated as at 10. Immigration Act 1959/63 25 May 2012) 11. Architects Act 1967 34. Guidelines on Application For License for Tour Operating Business and Travel Agency 12. Companies Act 2016 Business (PLN Circular No. 6/2014) 13. Environment Quality Act 1974 35. EPU Guideline on the Acquisition of Properties 14. Competition Act 2010 36. Expatriate Services Division Online 15. Malaysian Aviation Commission Act 2015 Guidebook 16. Income Tax Act 1967 37. MIDA General Policies, Facilities and Guidelines 17. Promotion of Investments Act 1986 38. MIDA Guidelines on Tourism and Travel 18. Sales Tax Act 2018 Related Services 19. Service Tax Act 2018 39. MIDA Guidelines on Logistics Services 20. Customs Act 1967 40. MIDA Guidelines on Information and 21. Sales Tax (Amendment) Bill 2019 Communication Technology 22. Services Tax (Amendment) Bill 2019 41. MIDA Guidelines on Engineering and Energy Consultancy Services 23. Customs (Amendment) Bill 2019 42. MIDA Guidelines on Architectural 24. Standing Orders of the Dewan Rakyat (House Consultancy Services of Representatives) 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 33 43. MIDA Guidelines on Legal Services 60. WTO Agreement on Subsidies and Countervailing Measures 44. MIDA Guidelines on Accounting, Auditing and Taxation Services 61. General Agreement on Trade in Services (GATS), Malaysia Schedule of Specific 45. MIDA Guidelines on Malaysia: Investment in Commitments the Services Sector–Regional Operations 62. Malaysia-UK Investment Guarantee 46. Companies Commission of Malaysia Agreement Guidelines for Registration of New Business 63. General Agreement on Trade in Services 47. Securities Commission Licensing Handbook (GATS) 48. Bank Negara Malaysia (Central Bank of 64. Agreement on Trade Related Aspects of Malaysia) Foreign Exchange Administration Intellectual Property Rights (TRIPS) Notices 65. Agreement on Trade-Related Investment 49. Bank Negara Risk Management in Measures (TRIMs) Technology–Exposure Draft 66. Agreement on Subsidies and Countervailing 50. Bank Negara Interoperable Credit Transfer Measures (SCM) Framework 67. Convention on the Recognition and 51. Operational Procedures for Foreign Currency Enforcement of Foreign Arbitral Awards (New Settlement in the Real Time Electronic York Convention) Transfer of Funds and Securities System 68. International Centre for Settlement of 52. Malaysian Communications and Multimedia Investment Disputes (ICSID) Convention Commission Guideline on Substantial Lessening of Competition 69. Articles of Agreement of the International Monetary Fund 53. Malaysian Communications and Multimedia Commission Guideline on Mergers and 70. ASEAN Comprehensive Investment Acquisitions Agreement 2012 54. Malaysian Aviation Commission Guidelines 71. Australia-Malaysia FTA 2013 on Notification and Application Procedure for an Anticipated Merger or a Merger 72. ASEAN-China Investment Agreement 2010 55. Malaysian Aviation Commission Guidelines Secondary Sources on Substantive Assessment of Mergers 73. Malaysian Investment Development 56. Malaysian Competition Commission Authority’s website Guidelines on Leniency Regime 74. Malaysian External Trade Development 57. Petronas Licensing and Registration–General Corporation’s website Guidelines 75. Ministry of Health’s website 58. National Water Services Commission Guidelines on the Registration Notice for 76. Ministry of International Trade and Industry’s Class License (in Malay language) website 59. ASEAN Trade in Goods Agreement 77. Malaysian Aviation Commission’s website | 34 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA 78. Record, Richard James Lowden; Larson, 80. I-TIP Services database (https://i-tip.wto.org/ Bradley Robert; Teh Sharifuddin, Shakira services/default.aspx) Binti; Chong, Yew Keat. 2018. Malaysia’s Digital Economy : A New Driver of 81. Double Taxation Avoidance Agreements Development (English). Washington, D.C. : (http://www.hasil.gov.my/bt_goindex. World Bank Group. php?bt_kump=5&bt_skum=5&bt_posi=4&bt_ unit=1&bt_sequ=1&bt_lgv=2) 79. UNCTAD Investment Policy Hub (https:// investmentpolicy.unctad.org/international- investment-agreements) 2019 INVESTMENT POLICY AND REGULATORY REVIEW – MALAYSIA | 35 This Investment Policy and Regulatory Review presents information on the legal and regulatory frameworks governing foreign direct investment and competition that affect businesses and foreign investors. Since legal and regulatory frameworks are constantly evolving, a cut-off date was set for the research. This country review therefore covers information available as of May 31, 2019, unless otherwise indicated in the review. IPRRs are available for the following middle-income countries: Brazil, China, India, Indonesia, Malaysia, Mexico, Nigeria, Thailand, Turkey and Vietnam.