RESTRICTED
WORLD TRADE G/SCM/N/3/MYS
L/7611/Add.9
ORGANIZATION 12July1995
(95-1933)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
NOTIFICATIONS PURSUANT TOARTICLE XVI.1 OFTHE GATT 1994
AND ARTICLE 25OFTHE AGREEMENT ONSUBSIDIES AND
COUNTERVAILING MEASURES
MALAYSIA
Thefollowing updating notification, dated 30June1995, hasbeenreceived fromthePermanent
Mission ofMalaysia.
Inview ofthedecision taken bytheCONTRACTING PARTIES oftheGATT 1947 on
AvoidanceofProceduralandInstitutionalDuplication(L/7582,dated13December1994)thisnotification
isdeemed tobealsoanotification under Article XVI:1 oftheGATT 1947.
_______________
Iampleased tosubmit herewith Malaysia 'snotification pursuant toArticle XVI.1 ofthe
GATT 1994 andArticle 25oftheAgreement onSubsidies andCountervailing Measures.
Although Malaysia hassome doubts astowhether some ofthese programmes fallwithin the
definition ofasubsidy, theyarebeing notified intheinterest oftransparency. Asprovided forunder
Article 25.7oftheAgreement onSubsidies andCountervailing Measures, Malaysia 'snotification of
these measures doesnotprejudge either itslegalstatus under theGATT 1994 andtheAgreement on
Subsidies andCountervailing Measures, theeffects under theAgreement, orthenature ofthemeasure
itself.
Malaysia provides incentives toitsexporters, without maintaining direct export subsidies.
Theincentives areasfollows:
1. Double Deduction ofExpenses forPromotion ofExports
Certain expenses which areincurred byresident companies intheirsearch forexport markets
forMalaysian products areeligible fordouble deduction. Theexpenses thatqualify arethose incurred
on:
- overseas advertising;
- supply offreesamples abroad;
- export market research;G/SCM/N/3/MYS
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- preparation oftenders forthesupply ofgoods overseas; exhibits and/or participation intrade
orindustrial exhibitions heldoutside Malaysia;
- supply oftechnical information abroad;
- public relation services topromote exports;
- fares inrespect oftravel overseas;
- accommodation andsubsistence expenses incurred during overseas travel, subject toRM200
perday; and
- costofmaintaining salesoffices overseas forthepromotion ofexports.
1.1 Policy objective oftheincentive
ThedoubledeductionofexpensesforpromotionofexportsaimstoencourageMalaysian
manufacturers andtraders increase theexport ofMalaysian-made goods.
1.2 Authority oftheincentive
ThedoubledeductionofexpensesforpromotionofexportsisprovidedunderSection41
ofthePromotion ofInvestments Act1986andIncome Tax(Promotion ofExports) Rules 1986,
made under Section 41(3) ofthesame Act.
1.3 Form oftheincentive
Thedouble deduction ofexpenses forpromotion ofexports isaformoftaxconcession.
1.4 Duration oftheincentive
Thedouble deduction ofexpenses forpromotion ofexports wasmade effective on
1January 1986. There isnoexpiry dateprovided therein.
2. Double Deduction ofExport Credit Insurance Premiums
Premium payments inrespect ofinsurance ofproducts exported paidbyMalaysian exporters
tolocalinsurance companies areallowed asdouble deduction.
2.1 Policy objective oftheincentives
ThedoubledeductionofexportcreditinsurancepremiumsaimstoencourageMalaysia's
exporters topenetrate intonon-traditional markets.
2.2 Authority oftheincentive
Thedouble deduction ofexport credit insurance premiums isprovided under Income
Tax(Deduction ofPremium ofExport Credit Insurance) Rule1985 made under Section 154
oftheIncome TaxAct1967.
2.3 Form oftheincentive
Thedouble deduction ofexport credit insurance premiums isaformoftaxconcession.G/SCM/N/3/MYS
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2.4 Duration oftheincentive
Thedouble deduction ofexport credit insurance premium wasmade effective onyear
ofassessment 1986. There isnoexpiry dateprovided therein.
3. Local Content Requirement Attached toIncentives
Theuseoflocalcontent istaken intoaccount inthegranting ofinvestment incentives
provided bytheMalaysian Government. Local content usage isonlyoneofthequalifying
criteria butitisneither necessary norsufficient forthegranting ofinvestment incentives.
3.1 Objective oftherequirement
Theobjective ofthislocalcontent requirement istodevelop supporting industries in
order tostrengthen Malaysia 'sindustrial structure andencourage linkages between small and
medium scale industries (SMIs) andlarger firms.
3.2 Authority oftherequirement
Local content requirement isanadministrative encouragement andtheinvestment
incentives suchaspioneer status orinvestment taxallowance isgiven under thePromotion
ofInvestments Act1986.
3.3 Form oftherequirement
Thelocalcontent requirement isaform ofadministrative encouragement.
3.4 Duration oftherequirement
Thelocalcontent requirement wasfirstintroduced in1991.
4. Export Credit Refinancing
Notwithstanding ournotification oftheExport Credit Refinancing (ECR) Scheme, Malaysia
hasdoubts astowhether thisfallswithin themeaning ofasubsidy under Articles 1and2ofthe
Agreement onSubsidies andCountervailing Measures (SCM). Malaysia 'snotification under Article 25
should notprejudice thestatus ofthisscheme.
4.1 Policy objective oftheScheme
Theobjective oftheECR Scheme istoenable Malaysian exporters tocompete more
effectively intheinternational markets.
4.2 Authority oftheScheme
TheSchemeisoperatedbycommercialbanksandMalaysia'sCentralBank(BankNegara
Malaysia) willrefinance these banks.
4.3 Form oftheScheme
TheECR Scheme isaform ofexport credit.G/SCM/N/3/MYS
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4.4 Duration oftheScheme
TheECR Scheme wasfirstintroduced in1977 andhasbeenrevised several times.
Acomprehensive review wasundertaken in1985and1986. There isnoexpiry dateprovided
therein.
4.5 Brief description oftheScheme
TheECR Scheme provides ashort-term credit atthecurrent interest rateof6.0per
centperannum toMalaysian exporters.
Under theECR Scheme, thepre-shipment ECR facility provides working capital to
direct andindirect exporters (domestic suppliers ofinputs tofinalexporters). Thepost-shipment
ECRfacility enables Malaysian exporters toobtain immediate funds uponshipment ofeligible
goods soldoncredit terms. Access totheECR scheme issubject totheexporter obtaining
onECR credit facility withanycommercial bank. Themaximum period offinancing forall
eligible products isfour(4)months forpre-shipment andsix(6)months forpost-shipment.