KL manufacturers seek tax cut, incentives
KL manufacturers seek tax cut, incentives
Eileen Ng, Agence France-Presse, Kuala Lumpur
Malaysian manufacturers called on Monday for a corporate tax
cut and the easing of a rule requiring 30 percent equity in Malay
hands as part of proposed measures to boost competitiveness and
woo foreign investors.
The Federation of Malaysian Manufacturers (FMM), in a
memorandum to the trade ministry, noted a flight of investors to
lower-cost countries and said "remaining obstacles to investment"
must be addressed urgently.
Total foreign investment approved fell sharply from 18.70
billion ringgit (US$4.92 billion) in 2001 to 11.20 billion in
2002, before recovering to 15.60 billion last year, it said.
Manufacturing growth was anaemic at 1.5 percent a year from
2001-2003, way below the 8.3 percent target for the period 2001-
2005, prompting a cut in the target to 7.8 percent for the
remaining two years, it said.
The FMM proposed a longstanding rule for 30 percent equity to
be held by ethnic Malays and other indigenous groups collectively
known as "bumiputeras" be loosened and viewed in the "overall
macro perspective" instead of at the company level.
"The 30 percent bumiputera equity condition should only be
imposed on companies when they go for public listing. This would
provide easy entry and exit for investors," it said.
The equity rule is part of the New Economic Policy, an
affirmative action program drawn up following bloody racial riots
in 1969 to help bumiputeras catch up with the wealthier Chinese
minority by giving them preferences in business and education.
The FMM also sought a phased reduction in the corporate tax
rate from the current 28 percent to 22 percent over five years,
with an initial cut of two percent followed by one percent in
subsequent years.
It noted that the claimed effective tax rate of eight percent
for the manufacturing sector was not across the board and only
applicable to companies that qualified for all available
incentives.
"Gradual removal of various fiscal incentives in favour of a
low and more automatic corporate rate would yield better results
in the long run," it said.
In Asia, Malaysia's corporate tax is higher than Hong Kong's
16 percent, Singapore's 22 percent, South Korea's 24 percent and
Taiwan's 25 percent. But it is lower than 30 percent in China,
Thailand, Indonesia and Brunei, and 32 percent in the
Philippines.
Economic rival Singapore has committed to lower tax further to
20 percent by 2005, widening the gap with Malaysia, which also
faces stiff competition for investment from low-cost producers
like Thailand and China.
The memorandum was submitted during FMM's annual dialogue
Monday with the trade ministry on trade and investment issues,
officials said.
The FMM called for the threshold limit of 2.5 million ringgit,
above which investors must seek approval from the Malaysian
Industrial Development Authority, to be increased to 10 million.
It proposed triple deduction on expenses relating to export
expansion, research and development, and business expansion so
that Malaysia could build its ability to customize production
according to market demands and competitive advantage in higher-
tech sectors.
As Malaysian exporters were subjected to additional testing in
importing countries, it called for international certification
and mutual recognition agreements with these market to cut costs
and reduce technical barriers.
For utilities, the FMM said there must be standard and
transparent tariff rates especially for natural gas users.