Equity Protection Policies

Equity Policy in the Manufacturing Sector

The Malaysian Government welcomes foreign investment in the manufacturing sector. In keeping with the objective of increasing Malaysian participation in manufacturing activities, it is the policy of the Government to encourage projects to be undertaken on a joint venture basis between Malaysia and foreign entrepreneurs.

Equity Policy Applicable to New Investment, Expansion & Diversification

Foreign equity participation in manufacturing projects has been governed by the level of exports. Effective from 31 July 1998, the Malaysia Government has liberalised the equity policy for the manufacturing sector in respect of new investment, expansion or diversification as follows:

  • Foreign investors can now hold 100% equity irrespective of the level of exports.

Equity holdings in all manufacturing projects were fully liberalised effective from 17 June 2003. Foreign investors can now hold 100% of the equity in all investments in new projects, as well as investments in expansion/diversification projects by existing companies, irrespective of the level of exports and without any product/activity being excluded.

The new equity policy also applies to:

  • Companies previously exempt from needing a manufacturing license but whose shareholders’ funds have now reached RM2.5 million or have now employed 75 or more full-time employees and are thus required to be licensed.
  • Existing licensed companies previously exempt from complying with equity conditions, but are now required to comply due to their shareholders’ funds having reached RM2.5 million.

Equity Policy Applicable to Existing Companies

Equity and export conditions imposed on companies prior to 17 June 2003 will be maintained.

However, companies can request for these conditions to be removed. The Government will be flexible in considering such requests and approval will be given based on the merits of each case. Companies with export conditions can apply for approval from MIDA to sell in the domestic market based on the following guidelines:

  • Up to 100% of their output for those products with nil duty or those not produced locally.
  • Up to 80% of their output if the domestic supply is inadequate or there has been an increase in imports from ASEAN of products with Common Effective Preferential Tariff (CEPT) duties of 5% and below.