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CORONAVIRUS – The situation in Malaysia

1. General situation

In response to the COVID-19 pandemic, the Malaysian government reviewed the implemented measures, i.e. Movement Control Order (MCO), based on the country’s pandemic situation from time to time. Most states in Malaysia are in Phase One of the movement control under the National Recovery Plan (NRP). Kelantan, Pahang, Perlis, Perak, and Terengganu have met the required thresholds and transited into Phase 2 of the NRP. A large part of Selangor and several localities in Kuala Lumpur are under the Enhanced Movement Control Order (EMCO) from 3rd July to 16th July 2021. Only essential economic and service sectors can operate during EMCO or Phase One of NRP, with strict adherence to SOP. Interstate travel remains banned nationwide. As of 8th July 2021, Malaysia recorded 808,658 total COVID-19 cases, of which 77,275 hospitalised, 725,480 recovered and 5,903 deaths.

The country border remains closed and only travellers with approval from relevant agencies are allowed to enter. On 12th January 2021, Malaysia’s King Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah announced a State of Emergency nationwide from 12th January 2021 to 1st August 2021 to contain further spread of the COVID-19 pandemic. Prime Minister Tan Sri Dato’ Haji Muhyiddin Yassin explained that under the proclamation of a State of Emergency, the government would continue to function and economic activities will operate as usual but subject to SOPs.

Prime Minister Tan Sri Dato’ Haji Muhyiddin Yassin highly emphasised that Malaysia is open for business and welcomes business travellers to do business in Malaysia. The government will remain committed to the 6-Phase Economic Recovery Plan (6Rs) in place since last year for economic recovery. The government has established the One Stop Centre (OSC) dedicated to supporting Malaysia’s economic recovery and growth while balancing public health and livelihoods and strengthening its position as a competitive and preferred investment destination in Asia.

2. Preventive measures

The Malaysian government implemented different-level Movement Control Order (MCO) to effectively control the current COVID-19 situation, ranging from high-risk to low-risk areas.

  • Phase 1 – MCO 1.0 from 18th March 2020 till 3rd May 2020
  • Phase 2 - Conditional MCO from 4th May 2020 till 9th June 2020
  • Phase 3 - Recovery MCO from 10th June till 31st December 2020
  • Phase 4 – CMCO in the areas with high COVID-19 cases from 14th December 2020 till 31st  December 2020
  • Phase 5 – RMCO nationwide from 1st January 2021 till 31st March 2021; certain states with high COVID-19 cases were placed under MCO 2.0 from  13th January 2021 till 4th March 2021
  • Current Measure - All states are in Phase One under the NRP, except Kelantan, Pahang, Perlis, Perak, and Terengganu are in Phase 2. A large part of Selangor and several localities in Kuala Lumpur are under the Enhanced Movement Control Order (EMCO) from 3rd July to 16th July 2021

SOP For Phase One under NRP:

All economic and social activities are not allowed to operate with the exception of 17 essential services, and companies are required to get approval from Ministry Internation Trade and Industry (MITI) via the CIMS 3.0:

  1. Food and beverage including for animals (pets)
  2. Health and medical care including dietary supplements; veterinary clinics and related services
  3. Water
  4. Energy
  5. Security and safety, defence, emergency, welfare and humanitarian aid
  6. Solid waste and sewage management as well as public sanitisation
  7. Land, air and water transportation
  8. Port operators and services, shipyards and airports including for cargo handling and storage or commodity stocking
  9. Communications including media, telecommunication and internet, postage, courier as well as broadcasting for the dissemination of information and news
  10. Banking, insurance, takaful and capital markets
  11. E-commerce and information technology
  12. Community credit operators including pawnshops and Ar-Rahnu
  13. Production, distillation, storing, supply as well as distribution of fuel and lubricant;
  14. Hotels and lodgings restricted for quarantine, isolation, employment of essential service and not for tourism purposes
  15. Construction, critical maintenance and upgrading works
  16. Forestry (limited to enforcement) and wildlife
  17. Logistics - limited to delivery of essential services

13 economic sectors to operate with 60% workforce capacity, subject to approval from MITI:

  1. Aerospace including maintenance, repair and overhaul (MRO)
  2. Food and beverage
  3. Packaging and printing materials
  4. Personal care products and cleaning supplies
  5. Healthcare and medical care including dietary supplement
  6. Personal protective equipment (PPE) including rubber gloves and fire safety equipment
  7. Medical equipment components
  8. Electrical and electronics
  9. Oil and gas, including petrochemical and petrochemical products
  10. Chemical products
  11. Machinery and equipment
  12. Textiles for manufacturing of PPE only
  13. Production, distillation, storage, supply and distribution of fuels and lubricants.

5 sectors allowed to operate with 10% workforce capacity, subject to approval from MITI:

  1. Automotive (vehicles and components)
  2. Iron and steel
  3. Cement
  4. Glass
  5. Ceramics

Interstate and interdistrict travel are not allowed, except for emergencies such as death and to get medical help, permission can be obtained directly from the police at roadblocks (only 3 people per vehicle allowed for emergency situations).

Only 2 people per household are allowed to go out to shop for daily necessities.

Face-to-face meetings, seminars, trainings, exhibitions, talks, and conferences are prohibited.

Social events such as weddings, receptions, birthday celebrations, reunions, retreats, akad nikah etc are strictly prohibited.

All sports and recreational activities (including tournaments and trainings) are not allowed, except jogging and non-contact individual exercise.

All educational institutions closed. Childcare centres and private (or international) kindergartens are allowed only to operate for children in the situation both parents work in essential services.

Only 2 passengers (including the driver) are allowed per car in taxis and e-hailing vehicles.

All F&B outlets are allowed to operate for delivery and takeaway services only.

Wearing double face masks is encouraged but not compulsory. For those (visiting) high-risk areas like hospitals, the government encourage them to wear three-ply or N95 face masks fabric face masks.

itizens who need to cross district lines to head for their vaccination appointments do not require a permission letter from the police and can simply flash their proof of appointment on the MySejahtera app, website or SMS if stopped by authorities.

For more information:

SOP For Enhanced Movement Control Order (EMCO):

EMCO areas will be closed and controlled by the police.

All economic and social activities are not allowed to operate except for several essential services:

  1. Purchasing necessities within a radius of 10km
  2. Factories that produce food items and basic daily necessities
  3. Eateries include restaurants, kiosks, stalls, food trucks and food courts
  4. Hospitals, clinics, medical laboratories, pharmacies, pet shops and veterinary clinics
  5. Convenience and grocery stores
  6. Wholesale markets
  7. Petrol stations except those on highways

All essential services are allowed to operate from 8am to 8pm only.

Only 1 passenger (including the driver) are allowed per car in taxis and e-hailing vehicles.

Only 1 person from each household is allowed to go out for essentials.

Citizens who need to cross district lines to head for their vaccination appointments do not require a permission letter from the police and can simply flash their proof of appointment on the MySejahtera app, website or SMS if stopped by authorities.

  • Penalties

According to the Emergency (Prevention and Control of Infectious Diseases) (Amendment) Ordinance 2021, effective from 11th March 2021, any individuals who violate SOPs stipulated for the prevention and control of the COVID-19 pandemic can be fined up to RM10,000. Companies or corporations that violate the SOPs can be fined up to RM50,000.

  • Foreign Travel Restrictions  

International travel is still not permitted as Malaysian borders remain closed. All foreign travellers to Malaysia are subject to relevant authorities’ approval.

Category of Passengers Allowed Entry:

  1. Malaysian
  2. Foreigners with Permanent Resident status
  3. Diplomat and Dependant of Foreign Mission in Malaysia
  4. Expatriates and their dependents, including foreign maids to expatriates holding a valid long-term pass and/or obtaining pass approval to enter Malaysia. The application made through MYEntry system in ESD https://esd.imi.gov.my/portal/
  5. The passes category are as follows:
    • Residence Pass-Talent (RP-T) and their dependent/s
    • Employment Pass (Category EP I, II and III)
    • Professional Visit Pass (PVP)
    • Dependant Pass to expatriate for all categories
    • Long Term Social Visit Pass (LT-SVP) to expatriate for all categories
    • Foreign Maid to expatriate for all categories
  6. Malaysia My Second Home (MM2H) Pass Holders
  7. Student Pass Holders
  8. Medical Tourism – Malaysia Healthcare Travel Council (MHTC)
  9. Other Long-Term Social Visit Pass (LTSVP) (Resident Pass / Temporary Employment Visit Pass (PLKS) / Professional Visit Pass (PVP/PLIK) / Dependant Pass to the LTVP Holders
  10. Oil and Gas workers and Seafarers

Above entry restrictions do not apply to passengers/nationals of Argentina, Bangladesh, Brazil, Chile, Colombia, France, German, India, Indonesia, Iran, Iraq, Italy, Mexico, Pakistan, Peru, Philippines, Russia, South Africa, Saudi Arabia, Spain, Turkey, United Kingdom, United States. However, passengers from the aforementioned nations are allowed to transit in KLIA within 24 hours and certain long-term passes holders may apply to enter Malaysia. In addition, as of 20th November 2021, spouses of Malaysian citizens may apply for entry permission via My Travel Pass.

Malaysia-Singapore Allowed Entry:

Malaysia and Singapore’s borders have reopened for travellers under Periodic Commuting Arrangement (PCA), a travel scheme negotiated between Singapore and Malaysia that requires travellers to stay in the destination country of work or business, i.e. Singapore or Malaysia, for a minimum 90-day period. The Singapore-Malaysia Reciprocal Green Lane (RGL) is currently suspended until further notice. From 10th May 2021, people from either country can apply for cross-border travel to visit family members for emergency reasons such as death or critical illness.

The Malaysian government is very open to business and welcomes the entry of business travellers amid the pandemic. The government established the One Stop Centre (OSC) in October 2020, aiming to expedite business travellers’ business entry to Malaysia. The government has also created a Safe Travel Portal containing information and advisory services to facilitate Short-Term (who are not holding any passes and intend to stay in Malaysia for 14 days or less) and Long-Term (who have valid passes and intend to stay in Malaysia for over 14 days) business travellers’ entry into Malaysia. The application can be made via https://safetravel.mida.gov.my.

For more information:

COVID-19 Variants of Concern (VOC)

As of 18th May 2021, three VOCs have been detected in the country, namely the South African variant (B.1.351), the UK variant (B.117) and the Indian variant (B.1.617.1). These VOCs spread rapidly and were also linked to high fatality rates. Travellers from countries reporting the spread of a COVID-19 VOC must undergo a COVID-19 test within 3 days of departure, mandatory quarantine at the assigned quarantine location for 14 days, and undergo a second COVID-19 test on the 10th day of quarantine. The Ministry of Health Malaysia, in collaboration with the National Health Institute (NHI) and other relevant agencies, will, from time to time, update the list of countries with the Variant of Concern (VOC) SARS-Cov-2.

For more information: Updated SOPs for Travellers from Countries Reporting a COVID-19 VOCs 

  • rT-PCR COVID-19 Test

Before entering Malaysia, the applicant is ENCOURAGED to undergo the RT-PCR COVID-19 test abroad within 3 days and must be medically confirmed to be tested negative for COVID-19. The government requires All travellers (both Malaysians and foreign nationals) with negative RT-PCR COVID-19 test results entering Malaysia will undergo 14 days mandatory quarantine.

All entries into Malaysia are COMPULSORY to undergo health screening at the Point of Entry (POE) and bear all the costs. Those who transit in less than 24 hours at KLIA and continuing their journey to Sabah, Sarawak and Labuan will have to do the RTK Ag test. Travellers who exhibit severe COVID-19 symptoms will be direct to the hospital.  

For more information: Annex 9 Management of COVID-19 PoE 07102020.docx (moh.gov.my)

  • Quarantine Information

To curb the spread of COVID-19, the Malaysian government has imposed mandatory quarantine orders at the gazetted quarantine stations to all incoming travellers, subject to Section 15 (1) Prevention and Control of Infectious Diseases Act 1988 (Act 342). Passengers travelling from overseas with a negative RT-PCR taken 3 days before departing to Malaysia must undergo a 7 days mandatory quarantine at the designated quarantine station in Malaysia. Those travelling into Malaysia without the RT-PCR test will undergo 10 days mandatory quarantine.

The government has determined that People Under Surveillance (PUS) will be quarantined in a hotel that has been gazetted as a quarantine station on the arrival day or choose to be quarantined in a hotel that offers premium services. For that purpose, selection of Quarantine Station must be made by PUS three (3) days before the departure date via MySejahtera mobile application. A list of hotels offering premium services can be found on the NADMA web portal.

All individuals entering Malaysia through the International Entry Point are required to bear all costs incurred related to quarantine, COVID-19 tests and any other logistics charges. Citizens will be charging 100% of the hotel's maximum rate of RM150 per person per day, for a period specified by the MOH. Non-Citizens (including dependant) will be charging a maximum rate of RM150 per day per person for a period prescribed by the MOH and management charges of RM2,600.00. Any payment for applicable charges is to be made through the MyQR phone app or MySafeTravel System (https://safetravel.myeg.com.my/) before they arrive in Malaysia.

On 12th January 2020, the Malaysian Ministry of Health (MOH) announced that Level 1 and Level 2 COVID-19 patients would undergo treatment and home quarantine for 10 days while being monitored strictly by health workers. However, the home quarantine order will depend on the house’s size and the number of occupants. MOH has established 213 COVID-19 Assessment Centres (CAC) nationwide (in each district) to determine which patients can go for home quarantine. The CAC will also determine if a patient needs treatment in the quarantine stations or hospitals.

For more information: GUIDELINES Mandatory Quarantine Order 24 July 2020_update 15 Oct 2020.pdf

  • MySejahtera Application

All Malaysians and foreigners who wish to return to Malaysia are COMPULSORY to download and install the MySejahtera application on their mobile phones. MySejahtera is an application developed by the Malaysian government to assist the Ministry of Health (MOH) monitor users’ health conditions and take immediate actions to provide the treatments required.

Please go to the link below to download the application: https://mysejahtera.malaysia.gov.my/

3. Exit strategy

On 15th June 2021, the Malaysian government announced the National Recovery Plan (NRP) consists of four phases of an exit strategy to assist Malaysia in exiting from the pandemic. The transition from one phase to the next phase will be based on three threshold indicators:

  1. The state of COVID-19 transmission in the community based on the number of daily cases of infection;
  2. The capacity of the public health system based on the rate of ICU wards occupancy;
  3. The percentage of the population covered with two doses of vaccine injection.

The government is currently implementing the National COVID-19 Immunisation Programme (PICK). As of February 2021, Malaysia has secured 66.7 million vaccines covering 109.65% of its population through the COVAX Facility and early purchases from 5 COVID-19 vaccine manufacturers. Vaccines are sourcing from 5 manufacturers: Pfizer, AstraZeneca, Sinovac, CanSinoBIO and Sputnik V. The National Pharmaceutical Regulatory Agency (NPRA) has given conditional approval for the Pfizer-BioNTech, AstraZeneca and Sinovac Covid-19 vaccines in Malaysia. Sinovac Life Sciences of China appointed Pharmaniaga Life Science Sdn. Bhd. as their exclusive local distributor of the Sinovac vaccine. The Russian Investment Development Fund (RDIF) has partnered with Duopharma Biotech Berhad to source Sputnik V for Malaysia.  PICK will be implemented in 3 phases, starting from 24th February 2021:

  • First-Phase (500,000 people): Frontliners including personnel in public and private healthcare, essential services and defence services. Take place from February 2020 to April 2021.
  • Second-Phase (9.4 million people): The rest of the frontliners, elderly people aged 65 and above, high-risk groups with chronic diseases such as heart disease, diabetes, obesity, high blood pressure and people with disabilities. Take place from April until August 2021.
  • Third-Phase (Over 13.7 million people): Residents (citizens & non-citizens) aged 18 and above with priority given to the red zone, yellow zone, then green zone. Take place from May 2021 until February 2022.

The vaccination is voluntary and will be provided free of charge to all Malaysian citizens and non-citizens. All individuals aged 12 years old can apply to take the vaccine. The government aims to achieve at least 80% of Malaysia’s adult population receive vaccines by February 2022 to reduce infections, hospitalisations and death. Vaccinations will be carried out at 521 Vaccination Administration Centres (VACs), and more VACs will be opened soon. As of 8th July 2021, 17,452,973 individuals registered for vaccination, and 7,222,481 received the first dose. Vaccination registration and appointments can be made via MySejahtera and the official website.

In addition, Public-Private Partnership COVID-19 Industry Immunisation Programme (PIKAS) established as Phase 4 of the PICK to help expedite vaccination for the public, where PIKAS focuses on the workforce in critical manufacturing sectors. As of 27th June 2021, a total of 669,846 workers from 4,537 companies across Malaysia have registered. Under PIKAS, the government will provide free vaccines, while the private sector will manage the administration of the VACs, including engaging the services of private medical practitioners.

For more information: please refer to The Special Committee On COVID-19 Vaccine Supply (JKJAV) (vaksincovid.gov.my)

4. Economy

a. Economic impact

  • The COVID-19 pandemic has significantly impacted the Malaysian economy, leading to the currency devaluation (MYR) and the decline in the country's gross domestic product (GDP). Malaysian economy contracted 5.6% in 2020, its worst performance since the 1998 Asian Financial Crisis. The country’s GDP is expected to regain its growth in 2021 from 6.5% to 7.5%. Several key sectors such as entertainment, markets, retail, hospitality and tourism are adversely affected by the pandemic. Postal and Courier Services are recognised as one of the least impacted sectors. Besides, all businesses have to cope with the SOPs imposed by the government, which affected their operations. The government suffered losses of RM1 billion daily throughout the current FMCO 3.0.All tourism-related sectors are heavily affected by travel restrictions and consumer’s risk aversion.
  • Heightened financial market volatility due to various external uncertainties.
  • Most businesses’ sales/revenue declined and faces financial and cash flow risks. As of 1st May 2020, 67.8% of the total 4,094 Malaysian companies responded that no sales/revenue during the MCO period.
  • Supply disruption in the commodities sector due to unfavourable weather conditions continued maintenance works and MCO SOPs.
  • The unemployment rate rose to 4.9% in January 2021.

The government increasingly encourages Malaysians to opt for online shopping to limit movements, brings up the online sales of fast-moving consumer goods growth by over 40%. Malaysians are also getting used to cashless contactless payment methods.

b. Trade barriers

There are no new trade barriers added at this time.

As gazetted in the Control of Supplies (Prohibition on Export) (Amendment) Regulations 2020, the Malaysian government has banned exports of Face Masks as listed below:

  • Face Mask (Surgical/Medical) 1 Ply (Ear Loop)
  • Face Mask (Surgical/Medical) 2 Ply (Ear Loop)
  • Face Mask (Surgical/Medical) 3 Ply (Ear Loop/ Head Loop/Head Tie-On)
  • Face Mask (Surgical/Medical) N95

A letter of approval issued by the Controller of Supplies, Ministry of Domestic Trade and Consumer Affairs under the Control of Supplies Act 1961 is required for any export of prohibited goods.

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c. Measures for economic relaunch

a. Malaysian Budget 2021

Budget 2021 themed “Stand United, We Shall Prevail”, with the allocation of RM322.5 billion expenditure to revive the economy and help Malaysians weather the COVID-19 pandemic. The 2021 Budget has three key areas of focus: ensuring the wellbeing of the people, business continuity, and resilience of the economy. 73.30% of the total budget is allocated for Operating Expenditure, 21.40% for Development Expenditure and a special allocation of 5.30% for the COVID-19 fund. Budget 2021 extends the support provided in the earlier announced economic stimulus packages. Key highlights of Budget 2021:

  • Tax Incentive for Global Trading Centre: 10% income tax rate for a period of 5 years and renewable for another 5 years.
  • Extension of Principal Hub Incentive: Extended for another 2 years to 31st December 2022.
  • Relocation Incentives for Selected Services Sector: Income tax rate of 1% to 10% for 10 years for a new company, and 10% for 10 years for existing company with new service segment.
  • Relocation Incentives for Manufacturing Sector: Extended for another 1 year to 31st December 2022. Income tax rate of 0% for 10 or 15 years for new companies, or 100% investment tax allowance for 5 years for existing companies.
  • Tax Incentive for Manufacturers of Industrialised Building System (IBS) Components: Extended for another 5 years to 31st December 2025. Investment tax allowance of 60% on qualifying capital expenditure incurred within 5 years to be set off against 70% of statutory income.
  • Tax Incentives for Bionexus status company, Economic corridor developments, MRO activities for aerospace, and Building and repair of ships: Extended for another 2 years.
  • Tax Incentives for Manufacturers of Pharmaceutical Products including Vaccines: 0% to 10% income tax rate for the first 10 years and 10% for the subsequent 10 years.

For more information: https://www.treasury.gov.my/index-en.html  

b. National Economic Recovery Plan – PENJANA (Pelan Jana Semula Ekonomi Negara)

On 5th June 2020, Prime Minister Tan Sri Dato’ Haji Muhyiddin Yassin announced the Short-term National Economic Recovery Plan – PENJANA amounting to RM35 billion which aimed at reviving the country's economy. PENJANA will complement the various announced economic stimulus packages. Under the 6-Phase Plan (6Rs): Resolve, Resilience, Restart, Recovery, Revitalise and Reform, Malaysia is currently in the 4th Phase: Recovery, . PENJANA has 40 initiatives, focusing on 3 key thrusts - Empower People, Propel Businesses and Stimulate the Economy. For instance, PENJANA’s Wage Subsidy Program 1.0 benefitted over 322,177 employers and 2.64 million employees.

For more information, please refer to the link below:

c. Pemerkasa Plus (PEMERKASA+)

On 31st May 2021, the government has rolled out a RM40 billion financial aid package - PEMERKASA+ to assist affected Malaysians and tackle the economic impact following the Full MCO (FMCO) beginning 1st June 2021. PEMERKASA+ has three (3) main goals: Enhancing Public Health Capacity; Continuing the ‘Prihatin Rakyat’ Agenda; and Supporting the Business Continuity.

For more information, please refer to: https://www.pmo.gov.my/ms/pemerkasa/

d. Kita Prihatin Economic Stimulus Package

On 23rd September 2020, the government has rolled out the Kita Prihatin Economic Stimulus Package to assist micro-entrepreneurs, workforce, and those from the lower- and middle-income groups. The government allocated total RM755 million for Special Prihatin Grant to benefit 200,000 micro-entrepreneurs, RM2.4 billion for Wage Subsidy Programme 2.0 and RM7 billion for the Bantuan Prihatin Nasional 2.0 – cash aid for the eligible Malaysians. As of 26th February 2021, RM808.31 million has been channelled to 66,591 employers and maintain jobs for 554,876 employees under the Wage Subsidy Programme 2.0. 

For more information, please refer to: https://pre2020.treasury.gov.my/index_en.html

d. Economic outlook

It is known that the COVID-19 pandemic has impacted the Malaysian economy heavily, more so, the global economies. Below are the country’s key economic indicators recorded in Q1 2021:

  • Malaysia’s economy contracts marginally at -0.5% (Q4 2020: -3.4%).
  • GDP at current price: RM 370.80 billion (€73.62 billion)
  • Gross National Income (GNI): RM365 billion (€72.47 billion)
  • Exports: RM282.6 billion (€56.11 billion)
  • Imports: RM 223.5 billion (€44.38 billion)
  • Economic performance was supported by the Manufacturing sector (6.6%) and bounced back of Agriculture sector (0.4%).
  • Manufacturing sales increased by 8.5% to RM368.2 billion(€73.11 billion)
  • Expenditure performance was led by the rebounded of exports of goods and services (11.9%), as well as smaller descended in private final consumption expenditure (-1.5%) and gross fixed capital formation (-3.3%).

Most businesses’ operations are affected by the measures/SOPs imposed by the government. Over 66% of businesses experienced a drastic drop in demand due to the decline in private consumption. The government has proactively taken measures to stimulate and boost the economy and increase private consumption. The government also expect the National COVID-19 Immunisation Programme to resolve the current health crisis and stimulate economic performance.

e. Short term opportunities

a. Manufacturing Sector

Malaysia has a well-established Manufacturing Sector but has too much reliance on the Oil and Gas Sector. Malaysia remains an attractive investment destination, with the availability of well-educated labour, investor-friendly policies and incentives, well-developed Infrastructure and preferred gateway to enter the ASEAN market. Malaysia’s technologically-inclined economy is proven by the country's involvement in advanced industries such as E&E manufacturing, R&D, biotechnology, photonics, logistics, design, innovation, automotive and others.

The COVID-19 pandemic has triggered the Malaysian Government’s actions in ensuring smooth supplies of medicine, food and other essential goods. This shows short and long-term opportunities for the Manufacturing sector, especially for the Medical & Health industry and the Food & Beverages industry. The Malaysian government announced many attractive tax incentives for the manufacturing sector, including:

  • Tax Incentive for Global Trading Centre: 10% income tax rate for a period of 5 years and renewable for another 5 years
  • Principal Hub Incentive
  • Relocation Incentives for Selected Services Sector: Income tax rate of 1% to 10% for 10 years for a new company, and 10% for 10 years for existing company with new service segment.
  • Relocation Incentives for Manufacturing Sector: Income tax rate of 0% for 10 or 15 years for new companies, or 100% investment tax allowance for 5 years for existing companies.
  • Tax Incentive for Manufacturers of Industrialised Building System (IBS) Components: Investment tax allowance of 60% on qualifying capital expenditure incurred within 5 years to be set off against 70% of statutory income.
  • Tax Incentives for Bionexus status company, Economic corridor developments, MRO activities for aerospace, and Building and repair of ships
  • Tax Incentives for Manufacturers of Pharmaceutical Products including Vaccines: 0% to 10% income tax rate for the first 10 years and 10% for the subsequent 10 years.

For more information: https://www.mida.gov.my/home/

b. Manufacturing Sector - Electrical and Electronic Industry

The Electrical and Electronics (E&E) industry is poised to remain firm in 2020, despite the COVID-19 crisis, thanks to the Malaysian Government‘s proactive measures during the MCO period. According to Ms. Bee Bee Ng, President of SEMI Southeast Asia, Malaysian E&E landscape will remain robust in 2020, supported by the immense opportunities offered by the industry, especially with the rise in remote working, virtual learning and e-commerce. The increasing demand for smart manufacturing capabilities, automation and technological innovations would potentially stabilise the E&E industry.

Today, the Malaysian Investment Development Authority (MIDA) is looking into attracting investments in new and high technology areas post-COVID-19 supported by the well-developed infrastructure and numerous incentives for potential investors. MIDA is focusing on the companies from countries that are affected (by the trade war), to shift their operations to Malaysia and utilise Malaysia as a hub to penetrate the South-East Asian market.

c. Food Agriculture (Agri-food) Sector

The COVID-19 pandemic has triggered Malaysian Government actions to address food security issues, as the country is highly relying on the imports of F&B products, animal feeds for livestock and poultry sectors and raw materials for further food processing. The emphasis on food security has opened up promising opportunities in the Agri-food Sector for FDI, such as knowledge exchange and assistance in modernising the Agri-food Sector. This has sparked Malaysia to invest in the R&D of the Agri-food Sector to develop a food self-sufficient nation. The available opportunities including potential collaboration between Malaysian and Flemish companies in Agri-related knowledge transfer, adoption or selling of advanced technologies and machinery to modernise the Sector.

The PENJANA Short-term Economic Recovery Plan announced on 5th June 2020 has highlighted few supports for the Agriculture and Food sector, including:

  • Incentives to pioneer companies to train and educate the people to venture into agriculture and plantation.
  • Special Reinvestment Allowance for manufacturing and selected agriculture activity, from YA 2020 to YA 2021.
  • Micro Credit Financing for Agropreneurs under Agrobank (including commodity players) totalling RM350 million with an interest rate of 3.5%.

d. Drivers of the Logistics Sector

Malaysia has the 2nd highest E-Commerce penetration rate in the ASEAN region. During the COVID-19 pandemic, Malaysia’s E-Commerce Industry has expanded at a fast pace. The accelerated E-Commerce industry’s growth is mainly due to the increase in the number of online shoppers. The growth has also triggered the transformation of the Malaysian retailers’ business strategy toward E-Commerce and Internet-Of-Things (IoT). This has open opportunities for the main logistics drivers in the country such as Manufacturing, Pharmaceuticals, Food and Beverages, E-Commerce, and Third-Party Logistics sectors.

f. Long term opportunities

While Malaysia is concentrating on the immediate economic outcomes after COVID-19, TAPiO Management Advisory (a leading advisory company in Malaysia) has an alternative view that Malaysia should be seriously look into revamping future-ready sectors to stay competitive:

  • Diversify and modernise the Healthcare Sector by investing in the R&D Sector and establishing partnerships with key foreign stakeholders.  
  • Enhance the quality of Malaysia’s Education system.  Partnering with foreign higher education institutions to promote students’ international perspective.
  • Diversifying and modernise the sectors related to Food, Farming and Agriculture. To diversify from simply planting commodities to a new/existing commodity with wider job opportunities and downstream activities.
  • Diversify the Foreign Direct Investments (FDI) into the country, which is mainly contributed by the Oil and Gas Sector. This can be done by promoting innovative and advanced technologies in all existing or new industries.
  • Encourage foreign investors to establish or relocate subsidiary in/to Malaysia. Malaysia could take advantage of the current disruption in the global supply chain, as several Multinational Corporations are looking to relocate their companies from China.
  • Despite the current economic uncertainties, Malaysia is still firmly preparing to implement the National Fiberisation and Connectivity Plan (NFCP), which aims to improve the country’s digital connectivity by rolling out 5G in Q32020. Minister of Communications and Multimedia mentioned that reliable and affordable high-speed broadband connectivity is the key catalyst for bringing FDI into Malaysia’s digital economy. The NFCP is also expected to positively impact the Global Business Services (GBS) in Malaysia by empowering the employees to work from home.
  • In the COVID-19 aftermath, the Malaysian government is expected to improve the national competitiveness in FDI by introducing more investor-friendly policies and incentives.

5. Usefull links

6. Dossier coronavirus

Het coronavirus heeft een wereldwijde impact, niet alleen op de gezondheid maar ook op de economie. Ook uw export kan hiervan gevolgen of zelfs hinder ondervinden.

FIT monitort de risico's dagelijks en ons buitenlands netwerk informeert u over alle implicaties voor Vlaamse exporteurs op hun internationale activiteiten.

In het dossier Coronavirus vindt u een aantal nuttige tips, adviezen en inzichten in de economische impact van de verspreiding van het virus op internationaal ondernemen.

Met vragen over internationaal ondernemen in tijden van Corona, kan u terecht bij exportadvies-corona@fitagency.be.

12 juli 2021