RESTRICTED
WORLD TRADE G/TRIMS/N/1/MYS/1/Rev.1
18March 1996
ORGANIZATION(96-0960)
Original: English Committee onTrade-Related Investment Measures
NOTIFICATION UNDER ARTICLE 5.1OFTHE AGREEMENT
ONTRADE-RELATED INVESTMENT MEASURES
Malaysia
Revision
Thefollowing communication, dated 14March 1996, hasbeenreceived fromthePermanent
Mission ofMalaysia.
_______________
With reference toourearlier notification under thisArticle, Iampleased tosubmit herewith
Malaysia 'srevised notification pursuant toArticle 5.1oftheTRIMs Agreement.G/TRIMS/N/1/MYS/1/Rev.1
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MALAYSIA 'SREVISED NOTIFICATION PURSUANT TOARTICLE 5.1
OFTHE WTO AGREEMENT ONTRADE-RELATED INVESTMENT
MEASURES (TRIMS)
Pursuant toArticle 5.1oftheAgreement onTrade-Related Investment Measures (TRIMs),
Malaysia hereby notifies theCouncil forTrade inGoods, World Trade Organization (WTO) herTRIMs
asfollows:
1. Local Content Requirement Related toInvestment Incentives
1.1 Main Features
Local Content Requirement isgenerally imposed onmanufacturing projects which are
granted Pioneer Status orInvestment TaxAllowance incentive under thePromotion
ofInvestments Act1986onthebasisoflocalmaterial content, tomanufacture promoted
products gazetted from timetotimeunder thesame Act.
1.2 Category intheIllustrative List
ThisTRIM fallsunder Category 1(a)oftheIllustrative ListoftheTRIMs Agreement.
1.3 Authority ofApplication
ThisTRIM isapplied through administrative measures. Malaysia hasnolocalcontent
lawsorregulations. TheGovernment encourages theuseoflocal materials inthe
manufacturing sector andtheuseoflocalcontent istaken intoaccount inthegranting
ofinvestment incentives provided bytheGovernment. Thelocalcontent requirement
isenforceable during theperiod thatthecompany enjoys thebenefit oftheincentive.
1.4 Criteria forDetermining Enterprises
ThisTRIM isapplicable tomanufacturing projects proposed byeither foreign orlocal
investors. Manufacturing projects, ifgranted theincentive onthebasisoflocalmaterial
orlocal component usage would beimposed arequirement toattain thespecified
percentage leveloflocalcontent inorder toenjoy theincentive. Therequirement is
contained intheapproval letter granting theincentive.
1.5 Area ofApplication
ThisTRIM isapplicable tonewprojects proposed bynewenterprises ornewinvestment
projectsproposedbyexistingenterprisesprovidedthattheexistingenterpriseshadnever
enjoyed suchincentives before.
1.6 Nature ofAdvantage
Theadvantage oftheincentives isintheformofataxconcession ofeither aPioneer
Status oranInvestment TaxAllowance. Acompany given aPioneer Status willbe
granted anexemption of70percentonitsstatutory income fromthepayment ofincome
tax.Theperiod oftaxexemption isfive(5)years, commencing fromtheproduction
dateasdetermined bytheMinister ofInternational Trade andIndustry. Acompany
thatoptsforanInvestment TaxAllowance (ITA) would begiven anallowance of60per
centofitsqualifying capital expenditure incurred within five(5)years fromtheeffectiveG/TRIMS/N/1/MYS/1/Rev.1
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dateoftheincentive. Thisallowance canbesetoffagainst 70percentofthestatutory
income intheyearofassessment. Unutilized allowance canbecarried forward. Thirty
percent(30%) ofthecompany 'sstatutory income willbetaxed.
1.7 TRIM Related toSpecific Products
ThisTRIM isapplicable toalistofpromoted products gazetted under thePromotion
ofInvestments Act,1986.
1.8 DateofImplementation
ThisTRIM wasintroduced in1991. There isnomodification ofthisTRIM effected
within 180daysprior totheentry intoforce oftheWTO Agreement.
1.9 Provision forPhasing-Down/Elimination
ThisTRIM isapplied under administrative measures andthere isnoprovision forits
phasing-down orelimination.
1.10 Domestic Law, Regulation orAdministrative Guideline
There isnodomestic laworregulation under which thisTRIM isapplied. Local content
usage isonlyoneofthecriteria considered inthegranting ofinvestment incentives.
Other criteria arethelevel ofvalue-added, level oftechnology used, andprospects
forindustrial linkage creation. Acompany which desires toenjoy theincentive must
fulfil two(2)outofthefour(4)criteria.
1.11 Name ofImplementing Agency
Theimplementing agency isMalaysian Industrial Development Authority (MIDA),
anagency (statutory body) under theMinistry ofInternational Trade andIndustry
(MITI).
1.12 GeneralInformationontheLocalContentRequirementRelatedtoInvestmentIncentives
Theobjective ofthisTRIM istodevelop industrial projects including supporting
industries, tostrengthen industrial structure andenhance linkages between small- and
medium-scale industries andlarger firms.
2. Local Content Policy onMotor Vehicles
2.1 Description andMain Features
Local Material Content Policy onMotor Vehicles applies tomotorcycles, passenger
cars, andcommercial vehicles. Thelocal content programme onmotorcycles was
imposed whereby assemblers wererequired toachieve 60percentlocalcontent. The
motorcycle industry hasalready exceeded thisleveloflocalcontent. Similarly, the
localcontent programme forpassenger carsalsoprovides amaximum target oflocal
content ofupto60percent. Currently, thepassenger vehicles industry hasachieved
alocalcontent levelofonlyabout 30percent. Theleveloflocalcontent isdetermined
onapercentage point system based onthevalue ofthecomponents tothevalue of
thevehicle. Forcommercial vehicles upto2,500-ton gross vehicle weight, thetargetG/TRIMS/N/1/MYS/1/Rev.1
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localcontent is45percentandtheachieved localcontent iscurrently atonly20per
cent.
2.2 TheCategory intheIllustrative List
ThisTRIM fallsunder Category 1(a)oftheIllustrative listoftheTRIMs Agreement.
2.3 Authority ofApplication
ThisTRIM isapplied through administrative measures.
2.4 Criteria ofDetermining Enterprises
ThisTRIM isapplicable tocompanies thatproduce orassemble motorcycles, passenger
carsandcommercial vehicles.
2.5 Area ofApplication
ThisTRIM applies tobothnewenterprises orexisting companies inthemotor vehicles
industry.
2.6 Nature ofAdvantage
Itisjustacondition andthere isnotaxorfinancial advantage involved.
2.7 Relation toSpecific Products
ThisTRIM relates tomotorcycles, passenger carsandcommercial vehicles.
2.8 DateofImplementation andModification
ThisLocal Content Programme onmotorcycles wasimplemented in1981whilst similar
localcontent programme forpassenger carsandcommercial vehicles wasimplemented
in1990. There isnomodification ofthisTRIM effected within 180daysprior tothe
entry intoforce oftheWTO Agreement.
2.9 Provision forPhasing-Down/Elimination
ThisTRIM isapplied through administrative measure andthere isnoprovision for
itsphasing-down orelimination.
2.10 Name ofImplementing Agency
Theimplementing agency istheMalaysian Industrial Development Authority (MIDA),
anagency under theMinistry ofInternational Trade andIndustry (MITI).
2.11 General Information ontheLocal Content Policy
Therationale fortheLocal Content Programme istoachieve upgrading ofengineering
andtechnical skills inthedomestic component parts industry.