Equity Policy Applicable to New Investments, Expansion or Diversification
* Foreign equity participation in manufacturing projects has been governed by the level of exports. Effective from 31 July 1998, the Malaysian government has liberalised the equity policy for the manufacturing sector in respect of new investments, expansion or diversification as follows:
- Foreign investors can now hold 100% equity irrespective of the level of exports.
- This relaxation is applicable for all applications received from 31 July 1998 until 31 December 2000 to set up manufacturing projects with the exception of specific activities and products where Malaysian small and medium scale companies have the capabilities and expertise. These activities and products are paper packaging, plastic packaging (bottles, films, sheets and bags), plastic injection moulding components, metal stamping, metal fabrication and electroplating, wire harness, printing and steel service centers. For these activities and products, the prevailing specific equity guidelines are applicable
- All projects approved under this policy will not be required to restructure their equity after the period.
- This policy will be reviewed after 31 December 2000.
Equity Policy Applicable to Existing Companies
* Companies which have been licensed before 31 July 1998 have to comply with the equity condition as stated in the license. However, for existing companies undertaking expansion or diversification, the equity policy as in 1.1 applies to the expansion and diversification projects.
The equity policy as in 1.1 also applies to the following companies:
- Companies previously exempted from the Manufacturing License but whose shareholders' funds have now reached RM 2.5 million or have engaged 75 or more full time employees; and
- Existing licensed companies exempted from the equity condition which are required to inform the Ministry of International Trade and Industry (MITI) when their shareholders' funds reach RM 2.5 million.
Relaxation of Export Conditions for Existing Manufacturers
* To encourage greater levels of industrial linkages and domestic sales, the government has relaxed the export conditions imposed on manufacturing companies effective from 1 January 1998 to 31 December 2000.
* With this relaxation, all existing companies with export conditions can now apply to MITI for an approval to sell up to 50% of their output in the domestic market.
* The products which are eligible to be considered for increased domestic sales are as follows:
- All products with nil duty
- All products with import duty which are not available locally or in inadequate local supply
* The above temporary relaxation of export condition will not affect the current equity structure and incentives of existing companies
* The relaxation is also extended to new companies approved before 31 July 1998 once they commence operation.
Acquisition, Mergers, and Takeovers
* The acquisition of assets or any interests, mergers or takeovers of companies and businesses are governed by the Foreign Investment Committee (FIC) Guidelines, 1974. The guidelines are as follows:
- against the existing pattern of ownership, the proposed acquisition of assets or any interests, mergers or takeovers should result directly or indirectly in a more balanced Malaysian participants in ownership and control.
- the proposed acquisition of assets or any interests, mergers or takeovers should lead directly or indirectly to net economic benefits in relation to such matters as the extent of Malaysian participation, particularly Bumiputra participation, ownership and management, income distribution, growth, employment, exports, quality, range of products and services, economic diversification, processing and upgrading of local raw materials, training efficiency and research and development.
- The proposed acquisition of assets or any interest, mergers or takeovers of companies and businesses should not have adverse consequences in terms of international policies in such matters as defense, environmental protection or regional development.
- The onus of proving that the proposed acquisition of assets or any interest, mergers or takeovers of companies and businesses is not against the objectives of the New Economic Policy is on the acquiring parties concerned.
* The above guidelines will be applied to the following:
- Any proposed acquisition by foreign interests of any substantial fixed assets in Malaysia.
- Any proposed acquisition of assets or any interests, mergers and takeovers of companies and businesses in Malaysia by any means, which will result in owner-ship or control passing to foreign interest.
- Any proposed acquisition of 15% or more of the voting power by any one foreign interests or associated group, or by foreign interests in the aggregate of 30% or more of the voting power of a Malaysian company or business.
- Control of Malaysian companies or businesses through any form of joint-venture agree-ment, manage-ment agree-ment and tech-nical assis-tance agree-ment or other arrangement.
- Any merger or takeover of any company or business in Malaysia whether by Malaysian or foreign interests.
- Any other proposed acquisition of assets or interest exceeding in value of RM 5 million whether by Malaysian or foreign interests.
