investing in iskandar

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

4 quick facts Chapter 1: Introduction 1.1 Malaysia as an Ideal Investment Destination 1.2 Background of Iskandar International Positioning of Iskandar Iskandar s Positioning Global Regional Geographical Coverage Four Essential Components of Iskandar 1.3 The Comprehensive Development Plan (CDP) Strategic thrust of the CDP 1.4 Present and Future Structure of the Iskandar Economy 1.5 The Iskandar Regional Development Authority (IRDA) One Stop Centre 1.6 South Johor Investment Corporation (SJIC) Chapter 2: Legal System 2.1 Foundation of the Legal System 2.2 System of Government in Malaysia 2.3 Distribution of Powers between the Federal, State and Local Governments 2.4 Independence of the Judiciary 2.5 Malaysian Court System Superior Courts Subordinate Courts Chapter 3: Business Environment 3.1 A Snapshot of the Current Economic Situation and Projected Economic Growth 3.2 The Ninth Malaysia Plan (9MP) and Third Industrial Master Plan (IMP3) The Ninth Malaysia Plan (9MP) The Third Industrial Master Plan (IMP3) 3.3 Inflation Rate 3.4 Interest Rate 3.5 Knowledge Workers Chapter 4: Foreign Investment 4.1 Foreign Investment Committee (FIC) Broad Equity Policy Acquisition of Real Estate/Property by Foreign Parties Chapter 5: Banking System 5.1 Financial Institutions 5.2 Malaysia as an International Islamic Financial Centre 5.3 International Offshore Financial Centre 5.4 Capital Market Equity Instruments Debt Securities Derivatives Islamic Instruments

5 table of contents Chapter 6: Exchange Controls 6.1 Exchange Control External Accounts Foreign Currency Accounts Repatriation of Profits to Foreign Shareholders Distribution of Dividends Payment of Fees Voluntary Liquidation/Capital Reduction Foreign Credit Facilities Provision of Credit Facilities to Non-Residents Foreign Currency Credit Facilities Ringgit Credit Facilities IOFC Entities 6.2 Foreign Exchange Administration Policy for Iskandar Chapter 7: Structure of Business Entities 7.1 Companies Incorporated in Malaysia Forms of Companies Companies Limited by Shares Companies Limited by Guarantee Companies Limited by both Shares and Guarantee Unlimited Companies Incorporation of a Company Registration of a New Company Purchase of a Shelf Company Who can Incorporate a Company? Shareholders Conditions and Characteristics Number of Shareholders 7.2 Branches of Foreign Companies 7.3 Joint Ventures 7.4 Sole Proprietorship 7.5 Partnership 7.6 Representative Office/Regional Office Chapter 8: Financing Reporting and Audit Requirements 8.1 Accounting Standards 8.2 Audit Requirements 8.3 Record Keeping Chapter 9: Intellectual Property 9.1 Patents 9.2 Copyright 9.3 Trademarks 9.4 Industrial Designs 9.5 Layout Designs of Integrated Circuits Chapter 10: Taxation 10.1 Tax Administration Self-assessment System Payment of Tax Companies Individuals Employment Self-employment/Sole Proprietors Public Rulings

6 10.2 Direct Taxes Companies Scope of Taxation Corporate Tax Residence Rate of Tax Tax Computation Source Basis Deductible Expenditure Capital Allowances Tax Losses Tax Incentives Transfer Pricing Individuals Scope of Taxation Residence Tax Rates Personal Reliefs Withholding Tax 10.3 Capital Taxes and Transfer Taxes 10.4 Indirect Taxes Value Added Tax (VAT)/Goods and Services Tax (GST) Sales Tax Service Tax Customs Duty Excise Duty Chapter 11: Immigration and Employment Matters 11.1 Immigration Requirements Visas Employment Passes Policy Regarding Employment of Expatriate Personnel Application for Expatriate Posts Employment of Foreign Workers Special Categories of Employment Passes 11.2 Legal Requirements under the Employment Act Employees Provident Fund (EPF) 11.4 Social Security Organisation (SOCSO) Chapter 12: Incentive and Support Package 12.1 Approved Node Location Map - Node Tax Incentives Available to Companies in Iskandar 12.3 Non-fiscal Incentives for Iskandar 12.4 Qualifying Activities 12.5 Application Process chapter 13: Frequently Asked Questions (FAQs) useful information/addresses/ sources of information/glossary & definition

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

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

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

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

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

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

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

14 johore malaysia

15 1 Chapter 1 Introduction 1.1 Malaysia as an ideal investment destination 1.2 Background of Iskandar International Positioning of Iskandar Iskandar s Positioning Global Regional Geographical Coverage Four Essential Components of Iskandar 1.3 the Comprehensive Development Plan (CDP) Strategic thrust of the CDP 1.4 present and future structure of the Iskandar economy 1.5 the Iskandar Regional Development Authority (IRDA) One Stop Centre 1.6 South Johor Investment Corporation (SJIC)

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

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

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

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

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

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

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

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

24 1.5.1 One Stop Centre IRDA will establish a One Stop Centre (OSC) as a point-of-call for investors in Iskandar to obtain approvals for various aspects of developments such as planning and land matters, licenses and permits, immigration, business set-up and incentives. The OSC, which acts as a principal coordinating and facilitation agent on behalf of the Government, will offer a multi-channel government-investor interface through the employment of simplified processes and work procedures. The scope of the OSC will be confined to dealings with IRDA clients (i.e. investors undertaking major and strategic developments and investments in Iskandar, including those which are catalytic and have a high positive impact to Iskandar and the nation). In this respect, non-irda clients are expected to use the existing channels in their dealings with the respective government agencies for various applications for approvals. An Approvals and Implementation Committee (AIC) has been established to enable IRDA to adopt an investor-friendly mindset and efficient work processes. This committee serves to identify, monitor and coordinate the roles and activities of relevant government entities in order to expedite the processing, approval and the implementation of major or strategic developments and investments in Iskandar. For enquiries, please to: enquiries@irda.com.my. 1.6 South Johor Investment Corporation Berhad (SJIC) SJIC is the investment-holding company mandated to drive the commercial developments in Iskandar. SJIC promotes, coordinates and invests in strategic and catalytic initiatives through shareholding stakes in joint ventures or contribution of land either through sale or lease or granting of a concession or development rights. The mission of SJIC is to promote and coordinate the overall development and international positioning of Iskandar. The stakeholders of SJIC are Khazanah Nasional Berhad, Employees Provident Fund and Kumpulan Prasarana Rakyat Johor Berhad (KPRJ). KPRJ is a company wholly-owned by the Johore State Government. SJIC is set up with total assets of approximately RM3.4 billion in land banks and cash. As an investment-holding company, SJIC is a commercial entity with long-term profit objectives. SJIC will develop public-private partnerships to accelerate and enhance the growth of Iskandar. SJIC is tasked to facilitate the implementation of Government-funded projects under the 9MP ( ). For more information and enquiries on SJIC please visit pg. 22

25 2 Chapter 2 Legal System 2.1 Foundation of the Legal System 2.2 System of Government in Malaysia 2.3 distribution of Powers between the Federal, State and Local Governments 2.4 Independence of the Judiciary 2.5 Malaysian Court System Superior Courts Subordinate Courts

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

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

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

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

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

31 business environment Chapter 3 Business Environment 3.1 A snapshot of the current economic situation and projected economic growth Malaysia has gone through tremendous economic transformation which helped the country to make great strides in socio-economic development over the last 40 years. During the 1970s and 1980s, Malaysia was predominantly a commodity-based economy. The agriculture and mining sectors accounted for more than 1/3 of real gross domestic product (GDP) and over 3/4 of total exports. In the late 1980s, Malaysia took several critical steps to essentially diversify the structure and strengthen the resilience of the economy as well as diversify the country s exports. Hence the source of foreign exchange earnings. These included liberalising foreign investment in manufacturing industry and opening up the trade sector, supported by development and modernisation of enabling physical infrastructure, plus attractive tax and non-tax incentives. These moves served as catalysts that propagated the industrialisation of the Malaysian economy, driven by export-oriented foreign direct investment (FDI) into the manufacturing sector. Consequently, Malaysia s real GDP growth hit a high of 9.5% per annum between 1990 and 1996, compared with the average of 7% per annum in the preceding two decades. This in turn has steadily raised the manufacturing sector s contribution to the Malaysian economy over the past 20 years in terms of its share of output and exports to more than 30% and 80% presently, from just 10% of real GDP and 20% of total gross exports back in Thanks to this successful structural shift in the Malaysian economy, the country s per capita income is now around RM21,000 (USD5,700) from just over RM1,000 (USD350) back in Malaysia: Real GDP Growth (% p.a.) H MP IMP3 Real GDP Manufacturing Services Agriculture Mining Construction Private Consumption N/A Government Consumption N/A Fixed Capital Formation N/A Exports (Goods & Services) N/A N/A N/A Imports (Goods & Services) N/A N/A N/A 9MP covers the period IMP3 covers the period Source: Bank Negara Malaysia, Department of Statistics, Ministry of Finance s Economic Report 2007/2008, 9MP, IMP3 pg. 29

32 Malaysia: Share of Real GDP (%) H Manufacturing Services Agriculture Mining Construction Private Consumption N/A Government Consumption N/A Fixed Capital Formation N/A Exports (Goods & Services) N/A N/A N/A Imports (Goods & Services) N/A N/A N/A Source: Bank Negara Malaysia, Department of Statistics, 9MP, IMP3 Malaysia: Real GDP Growth & Per Capita Income 25, ,000 17, ,000 9,000 5,000 0 (5) 1,000 (10) RM % GDP per Capita (RHS) Real GDP (LHS) Source: Bank Negara Malaysia Annual Report 2006, Department of Statistics pg. 30

33 business environment Malaysia: Approved Manufacturing Investment & FDI RM (billion) USD (billion) Approved Manufacturing Investment (LHS) Source: MIDA, UNCTAD FDI (RHS) Malaysia: Share of Total Exports (%) H 2007 Manufacturing Commodities Source: Bank Negara Malaysia, Department of Statistics Post-Asian financial crisis in , the Malaysian economy recorded a respectable growth of 5.5% per annum up to the year Real GDP growth was sustained at 5.6% in the first 6 months of 2007, driven mainly by the robust growth in the services sector on the back of strong domestic consumption expenditure especially consumer spending. In addition, the construction sector is recovering, driven by higher Government spending on infrastructure and specific policy initiatives for the property sector. The high-end residential market in particular is flourishing. Performance in the first half of 2007 implies that the Malaysian economy is on the right track to achieve real GDP growth of 6% per annum up to For , the Malaysian economy is expected to expand by between 6% and 6.5%. Growth will be driven largely by domestic demand consumer, business and Government spending this translates into continued robust growth for the services sector and sustained recovery for the construction sector. At the same time, the mining sector is expected to benefit from higher investment and output from the oil & gas industry current up-cycle with the commencement of the development & production phase after the earlier exploration & discovery stage. pg. 31

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

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