WORLD TRADE
ORGANIZATIONWT/TPR/M/92/Add.1
1 February 2002
(02-0512)
Trade Policy Review Body
3 and 5 December 2001
TRADE POLICY REVIEW
MALAYSIA
Minutes of Meeting
Addendum
Chairperson:  H.E. Mr. Pekka Huhtaniemi (Finland)
This document contains the advance written questions and replies provided by the Malaysian
delegation to these questions and to other questions raised during the meeting.WT/TPR/M/92/Add.1
Page 3
JAPAN
Questions on the Report by the Secretariat (WT/TPR/S/92)
I.  Economic Environment;  (4)  Outlook;  Investment;  (p. 14, para. 36;  p. 44, para. 61)
Question
1. From the viewpoint of strengthening internatio nal competitiveness, does Malaysia have any
intention to further strengthen its trade and investment regime, such as taking further liberalization
measures?  In particular, by decision from the Goods Council, such regulations as the local-contentrequirement on motor vehicles are to be completely abolished at the end of 2003.  Does Malaysia
intend to accelerate plans for the abolishing of such regulations?
Answer
Further trade and investment liberalization measures will continue to be taken.  On local-content
requirements, the Local Material Content Policy as well as 11 products in the automobile sector willbe phased-out on 1 January 2002 in advance of the December 2003 deadline.
(p. 23, paras. 45, 47 and 48)
Question
2. Foreign equity ownership is limited to 30%, except for certain manufacturing industries, such
as those with higher levels of exports and those dealing with high-technology.  Although Malaysia hasrelaxed its restriction on foreign equity ownership, this is only a temporary measure.  Japan requests
Malaysia to convert this temporary deregulation of  foreign investment restriction into a permanent
one, and thus to abolish the export requirement.  Moreover, Japan requests Malaysia to deregulate
the same 30% foreign equity restriction applied to the services industry.
Answer
Malaysia limits foreign equity ownership to 30% in areas where its own human resources have both
the necessary technological and managerial skills to operate and manage those particular industries orsectors.  This is to encourage and build-up local equity in areas/industries which Malaysians are
capable of managing.  Malaysia exercises flexibility on foreign equity.  Where there is need to
encourage investment in a particular high technology or specialist management industry, Malaysia has
and will relax its restrictions on foreign equity ownership.  This includes the services sector, under the
appropriate circumstances.
Question
3. Malaysia’s domestic laws and regulations often change quite suddenly, without prior notice.
In addition, such laws and regulations are often unclear.  Japan hopes that Malaysia can create and
maintain a stable investment environment in the near future.
Answer
It is not true that Malaysia’s domestic laws and regulations often change suddenly and without prior
notice.  All laws and regulations are created or amended based on need to improve legislative clarity,
besides reducing bureaucracy and increasing investors’ confidence.  When laws need to be created,WT/TPR/M/92/Add.1
Page 4
amended or revoked, any person/sector/industry which is to be affected is made aware of the nature
and purpose of the said amendments.
II.  Trade Policy Regime:  Framework and Objectives;  (5)  Trade Agreements and
Arrangements;  Tariffs;  (p. 18, para. 18)
Question
4. The Secretariat's Report states that Malaysia maintained a low level of tariff bindings, i.e.
that is bound 65 per cent of its tariff lines in 1995.  Would it be possible for Malaysia to increase itsbinding level in the near future?
Answer
Negotiations on market access for non agricultural products are expected to commence next year.
Malaysia will be considering the further liberalization of our tariff regime in the context of these
negotiations.
III.  Trade Policies and Practices by Measure;  (1)  Introduction;  Tariffs; (p. 25, para. 2)
Question
5. Malaysia's average applied MFN tariff increased to 9.2 per cent in 2000, up from 8.1 per cent
in 1997.  This rise in tariff protection is said to be due to:  i) a relatively low level of tariff bindings
and ii) the relatively wide gaps between bound and applied rates.  Would it be possible for Malaysiato address this situation with a view to ensuring the more predictability in its tariff system?
Answer
The Doha Ministerial Meeting agreed on a programme of work for non agricultural products.  It is
expected that these issues will be addressed in the context of such negotiations.
(2)  Measures Directly Affecting Imports;  Customs procedures;  (p. 27, para. 14)
Question
6. The Malaysian authorities indicate that the duration for customs clearance for cargo varies
considerably, ranging from just three hours up to two working days, even if all the documentary
requirements have been met.  Can Malaysia explain what is the reason for such a time lag in customs
clearance?
Answer
The customs clearance of different types of cargo requires different set of formalities in accordance
with the procedural or legislative requirements taking into account health and safety interests.   In the
clearance of such cargo,  the Health Authority, the Quarantine Department and the Electrical
Inspectorate are involved.WT/TPR/M/92/Add.1
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Import prohibitions;  (p. 33, para. 41)
Question
7. The Report states that a temporary ban has been imposed on rice imports of a similar grade
to rice produced by domestic farmers.  We woul d appreciate receiving more information on this
temporary measure.
Answer
The temporary ban on importation of similar grade rice produced by domestic farmers was to reduce
the high stock of unsold paddy in the mills nationw ide.  Rice farmers fall in the hardcore poverty
income groups. Importation of other grades continue to be allowed.
Export taxes;  (p. 46, para. 70)
Question
8. Many tariff lines, including agriculture, forestry and fishery products are subject to export
duties, and the overall average of the ad valorem export duties increased from 7.8% in 1997 to the
current 11.7%.  As no commitment to bind or reduce export taxes exists, we are concerned by such
export duties as they can have a negative effect on the balance of rights and obligations between
importing and exporting countries.
Regarding the phrase that timber (log and sawn) produced in and exported from Sabah is exempt
from payment of any export duties provided royalt ies have been paid, we have been informed that
Sabah and Sarawak impose higher royalties on logs for export than those for domestic processing,
thereby providing a preferential status to domestic processing.  Such a discriminative royalty system
could be considered as an export duty.  Please comment on this.
Answer
It is important to appreciate that the issue of tim ber had featured prominently, particularly in relation
to sustainable forest management.  This is particularly evident in Sabah and Sarawak which have beengiven wide publicity by the media and NGOs.  Invariably, the government would have to impose
specific policy measures to attain the objective of sustainable forest management as well as providing
the necessary revenue for development purposes.  It is important to recognize that such measures
would need to be viewed from an appropriate perspective.
Export restrictions;  (p. 47, paras 75 and 76)
Question
9. In addition to the export prohibitions based on the "Customs (Prohibition of Exports) Order
1998", export prohibitions on all logs, except for small size wood have been implemented in the Malay
Peninsula since 1985.  In the State of Sabah, an annual  export quota of two million cubic meters has
been imposed since November 1996.  The State of Sar awak also has been implementing export quotas
in order to set aside a certain amount of logs pr oduced in its territory for the purpose of domestic
processing.  Could Malaysia explain the consistency of these measures with Article XI of GATT 1994?WT/TPR/M/92/Add.1
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Answer
These measures are taken to address the concerns from many quarters including NGOs and some
developed countries on the need for environmental protection to prevent over logging.  They are to
ensure sustainable forest management.
Export finance, insurance and guarantees;  (p. 50, paras. 86-89)
Questions
10. Please explain the scheme for export finance, insurance and guarantees on agriculture,
forestry and fishery products?  What volume of finance is granted to such schemes?
Answer
The Export Credit Refinancing (ECR) is a scheme to promote the export of manufactured and
agricultural products as well as selected primary commodities by providing the exporters with access
to credit facilities at competitive rates.  However, unprocessed agriculture and fishery products are notcovered by the ECR scheme.  There are two types of facilities available, namely the pre-shipment and
post-shipment ECR.
Intellectual property rights;  (p. 60, para. 119)
Question
11. Japan understands that, as Malaysia’s transition period regarding the TRIPS Agreement
expired on 1
st January 2000, Malaysia had, by that period, fully implemented th e TRIPS Agreement as
a result of making or amending all related laws a nd regulations including those of para. 119.  Is this
understanding correct?  If Malaysia has not yet completed its process of making or amending laws
and regulations for the implementati on of the TRIPS Agreement, please  indicate the schedule for such
amendments.
Answer
Malaysia has amended all relevant intellectual property legislation and enacted two new legislation i.e.
Geographical Indications Act and Layout Design of In tegrated Circuits Act to bring its IP Legislation
in conformity with the TRIPs Agreement.  The plant varieties legislation will be tabled in Parliament
next year.
Question
12. Although Malaysia is to have a legislative re view in the TRIPS Council in November, it has
not yet made notification of its laws and regulations  pursuant to the para. 2, Article 63, of the TRIPS
Agreement.  Japan requests Malaysia to notify its laws and regulations, as referred in para. 119, as
soon as possible.
Answer
Malaysia notified TRIPS-related Laws and Regulations on 31 October 2001.  Its legislation was
reviewed by the TRIPS Council on 27 November 2001.WT/TPR/M/92/Add.1
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(p. 60, para. 120)
Question
13. Please provide the figures of the past every 3 year regarding the results of having prohibited
infringement products at the border.
Answer
The amendments to the Trade Marks Act 1976 and Copyright Act 1987 incorporating provisions for
border measures came into force only on 1 August 2001.  Hence, no historical records are yetavailable.
(p. 60, para. 121)
Question
14. According to the Report, Malaysia intends to join the Patent Cooperation Treaty.  Please
explain the schedule for its accession process.
Answer
Malaysia intends to join the Patent Cooperation Treaty possibly by next year.  The legislative process
to ratify the treaty will take the form of an amendment to the Patents Act.  This requires approval from
Parliament.  As such, the process will take several months to be completed.  Upon approval, Malaysia
will deposit the PCT Instrument with WIPO.
(p. 62, paras 127-129)
Question
15. It is reported that foreign well-known trademarks are often used by a third party not having
the owner’s consent for its use.  Please explain the current situation for the protection of foreign well-
known trademarks, and what measures Malaysia takes?
Answer
The Trade Marks Act 1976 has been amended to enable the proprietor of a well-known trade mark to
prevent third parties from using the trade mark without the proprietor’s consent even though the
proprietor does not carry on business or does not have any goodwill in Malaysia.  It also prohibits the
registration of well-known trade marks for goods and services of a person who is not the proprietor of
the trade marks.
(p. 63, para. 132)
Question
According to the Report, under the Geographical Indications Act 2000, protection is applicable to
such selected goods as wine, agricultural products and handicrafts.  In this regard:
16. Please indicate which other products this Act covers to those already mentioned?  Please
provide a comprehensive list.WT/TPR/M/92/Add.1
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Answer
Under Malaysia’s Geographical Indications Act 2000, the goods covered include any natural or
agricultural product or any product of handicraft or industry.
Question
17. To which products does this Act provide the same protection as that described in Article 22 of
the TRIPS Agreement?  To all products?
Answer
For all products mentioned above, these are given the same protection as stated in Article 22 of the
TRIPS Agreement.
Question
18. To which products does this Act provide the same level of protection as that described in
Article 23 of the TRIPS Agreement?  To wines and spirits only?
Answer
Only to wines and spirits.
(p. 63, para. 134)
Question
19. According to the Report, trade secrets are protected against unauthorised use and disclosure
under "common law".  Does this "common law" refer to judicial precedents?  If so, please indicate
some specific cases.  If there exists some specific written laws through which such protection is
ensured, please indicate them.
Answer
As a general rule, the law on trade secrets is under the purview of common law and equity.  This is to
say that if a person is entrusted with trade secrets, he has no right to use or disclose that information
for his own benefit at any time or in any way.  A party which has been aggrieved by the unauthorizeduse or disclosure of another party may petition the court for damages, injunction, account of profit or
any other remedies the court found fit or proper.  In a common law rule system, judicial precedence
play an important role in the protection of trade secret.  Some specific cases include Sulaiman bin
Mohd Hassan and Ors v Securities Commission (2001); Scott & Anor v Scott (1911-1913) and
Schmidt Scientific Sdn. Bhd. v Ong Han Suan (1997).
(p. 64, para. 139)
Question
According to the Report, the right to fix the rate of royalty payments for licensing intellectual property
rights in Malaysia is classified as a private right.  In this regard, please clarify the following points.
In the case of patents, copyrights or trade secrets:WT/TPR/M/92/Add.1
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20. Is the period of a licensing contract limited?  If so, please indicate the laws or regulations
which prescribe this;
Answer
In any contract entered into in Malaysia between two contracting parties, the period of a licensing
contract is to be determined by the parties involved.  The Contracts Act 1950 does not limit the period
of such  contracts.
Question
21. Is a deadline to pay a royalty fee set out by law?  If so, please indicate such laws or
regulations which prescribe this;
Answer
The terms on royalty fee and other conditions on the contract under the I.P. regime are to be
determined by the contracting parties, that is be tween the right holder and the user.  Under normal
circumstances, the time period for a user to pay a royalty fee should be expressly provided for in the
contract.  The Contract Act does not prescribe a specific time but a reasonable time limit should be
provided for in the contract.
Question
22. Is the renewal or extension of a licensing contract prohibited?  If so, please indicate the laws
or regulations which prescribe this.
Answer
The terms and conditions of any binding contract between the parties should be determined and agreed
upon by them and it is up to the parties whether or not to renew or extend a licensing contract.  The
general provision of the Contracts Act 1950 does not prohibit renewal or extension except as agreed
upon by the parties in the contract.
Question
23. In the case of trade secrets, one additional point needs clarification:  is there an obligation to
disclose such secrets after expiration of the contract?  If so, please indicate the laws or regulations
which prescribe this.
Answer
In any binding contract, a disclosure of a trade secret after the expiration of the contract would depend
largely on the terms and conditions of that contract.  If the contract provides expressly that no party
should disclose any secret, then the party that discloses such trade secrets after expiration of the
contract, would be subjected to a breach of contract.
State-owned enterprises;  (p. 64, para. 140)
Question
24. Japan notes that the development of the privatization programme in Malaysia has been on the
slow down since the economic crises in Asia and, as a result, the Government raised its capital shareWT/TPR/M/92/Add.1
Page 10
of some state-owned enterprises.  Please provide Malaysia’s view on the privatization process in the
future.
Answer
Privatization has played a vital part in strengthening the role of the private sector in Malaysia’
economic development.  It has contributed to the accelerated growth of the economy as well as helped
in the restructuring objective of the New Economic Policy.  The increased number of projects
privatized significantly reduced the Government’s financial and administrative burden, thus enablingthe Government to allocate more resources to the critical sectors of the economy.  However, due to the
financial crisis, the privatization programme has slowed down primarily because of the weak financial
position of the private sector thus affecting its ability to mobilize financial resources from banking and
financial institutions.  Looking forward, the implementation of the privatization programme will be
further accelerated in order to enhance efficiency and productivity.
Competition policies;  (p. 66, paras. 145-147)
Question
25. Japan notes that Malaysia is preparing a comprehensive competition law.  Please explain the
current situation of preparations, as well as the perspective for a legislation process.
Answer
The Ministry of Domestic Trade and Consumer Affairs is  preparing a policy position and a draft law
on competition.  The elements and  parameters being considered by a Steering Committee on
Competition Policy include abuse of dominant position of market power, restrictive business practices
(RBP’s) merger and acquisition and competition law  authority.
IV.  Trade Policy by Sector;  (4) Manufact uring;  Automobiles;  (pp. 74-75, para. 26)
Question
Concerning the "import licensing" mentioned in this  para., Japan would like to clarify the following:
26. What criteria does the Malaysian authority use when issuing "import licencing"?
Answer
Import of motor vehicles in completely knocked- down form (CKD) is subject to import licensing.
The import licence will be issued only to the moto r vehicle assembler.  For completely built-up unit
(CBU), import licences are given to the assemblers based on requirements.
Question
27. Is there any limitation in the number of "import licence" issued?
Answer
Same response as in Q.26.WT/TPR/M/92/Add.1
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Question
28. If an importer detains an "import licence", c an that importer always obtain permission to
import the products described in this para.?  If not, in which situation can permission not to be
obtained?
Answer
Same response as in Q.26.
Question
29. Does the Malaysian Government restrain th e amount of imports for each subject product?
Answer
Same responses as in Q.26.
Questions on the Report by the Government (WT/TPR/G/92)
Question
30. According to the Financial Sector Masterplan, published in March 2001, (referred to in para.
48-49 of the Government Report), Bank Negara intends to implement a gradual deregulation and
liberalization of the financial sector.
In this regard, even after domestic financial institutions are consolidated into ten groups (as referred
to in para. 44 of the Government Report), couldn’t this be still considered as over-banking, in light ofthe economic size of Malaysia?
Answer
The merger programme to consolidate the domestic banking sector in Malaysia into ten banking
groups was initiated to ensure that the domestic players are strong and well capitalized in order to be
able to compete more effectively and efficiently in a more globalized and liberalized environment.
As to whether the banking sector remains over-banked after the mergers into ten banking groups, this
will be left for the market to determine. There could well be more mergers and further consolidation afew years down the road, if market forces dictate.   Bank Negara Malaysia (BNM), on its part, will not
stand in the way of any further consolidation and market forces to make additional adjustments.
Question
As the last stage of the gradual deregulation, will the full-banking licenses be liberalized to foreign
financial institutions by 2007?  Depending on the financial condition of the domestic bankinginstitutions, could this liberalization be delayed?
Answer
The pre-requisites for granting of new banking licences have been clearly stated in the Financial
Sector Masterplan (FSMP).  Once the domestic banking institutions have built greater capacity and
capability to compete, greater liberalization measures  will be introduced progressively, beginning withWT/TPR/M/92/Add.1
Page 12
leveling the playing field between domestic banks and incumbent foreign banks.  New foreign
competition may be introduced subsequently if certain safeguards are met.
Question
31. There has been word among some market partic ipants that Bank Negara’s measures are not
entirely transparent.  In particular, the Bank’s instructions with regard to introducing, and
subsequently modifying, the selective exchange control measures (referred to in paras 51-53 of the
Government Report) have been so obscure that it has been considered as a cause of market confusion.When implementing further liberalization, therefore,  the administration of the financial sector should
be more transparent and less discretionary, in order to gain trust from the markets.
Answer
The introduction of the selective exchange control measures on 1 September 1998 was critical in
restoring stability in the financial markets and the economy. The controls were implementedpragmatically, and once stability was achieved, major modifications were made to liberalise the
measures (please refer to Annexes in the BNM Annual Report 1998-2000).  All these measures have
been implemented in a transparent manner, with instant dissemination of information being made and
released through the press, circulars to the banking institutions and postings at the Bank Negara
Malaysia website.  Bank Negara Malaysia also regularly meets with investors (domestic and foreign),manufacturers and other private sector bodies to explain the measures as well as to obtain their
feedback.
In liberalizing selective exchange control measures, Malaysia has adopted a consultative approach by
conducting discussions with all the relevant parties.   The progressive liberalization of these measures
took into account the views of investors.
Question
Although what is stated in para. 54 may be understandable in general terms, we would like to ask
Malaysia to seek liberalization as a matter of principle.
Answer
Currently, there is freedom of movement of cross-border capital flows.  Both foreign direct investment
(FDI) and portfolio flows can enter and leave Malaysia freely.  The only requirement is the filling up
of statistical forms.  Overseas investments and loans from abroad are only subject to approval basedon transparent prudential criteria.
Under such a liberal economic environment, market volatility and uncertainty demand caution and
proper sequencing of liberalisation measures to maximise the net benefits to our economy.  Our
experience in dealing with uncertainties is that policy prescriptions cannot be rigid and inflexible.
They have to adapt to changing conditions, as long as the longer-term objectives of facilitating cross-border flows are not undermined.
Malaysia believes that exchange controls should not be a substitute for sound macroeconomic
policies.  Nevertheless, the Malaysian experience has shown that selective and carefully designed
exchange controls, when used to complement conventional macroeconomic policies, can contribute to
economic stability.WT/TPR/M/92/Add.1
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Question
32. As mentioned in para. 53(e), Malaysia has maintained a fixed exchange rate system that is
pegged to the U.S. dollar.  However, in view of the lessons gained fr om the past currency crisis, the
fixed exchange rate system would not be sustainable forever, and some exit policies (e.g. the transition
into a floating exchange system) might be eventually necessary.  In this connection, it goes without
saying that, if the foreign exchange system is to be changed, the authorities should try to avoid
causing any confusion in the market.  What is Malaysia’s view on this point?
Answer
1. Historically, most developing countries that have instituted "soft" forms of fixed exchange
rate regimes have not been successful and were forced to exit, many in crisis environments.  However,
it should be highlighted that in most cases, the currency pegs became unsustainable because they were
not supported by economic fundamentals and because of other inconsistent policies.  These countriesusually had high inflation, fiscal and current account deficits and inadequate international reserves.
These factors are not present in the case of Malaysia.
2. The issue is not the exchange rate regime but that macroeconomic fundamentals must be
present to support the regime.  In Malaysia, sound macroeconomic policies have supported the
sustainability of the peg.  These strong economic fundamentals are:
- Low inflation, which is expected to remain in the near term;
- Continuous surpluses in the current account;
- A comfortable level of international reserves;
- Low external indebtness;  and
- A banking sector that is resilient and well-capitalized.
3. Furthermore, the Malaysian economy has been flexible and resilient enough to deliver the
necessary internal adjustments in the face of external shocks.
It is useful to emphasise the point made by Jeffrey Frankel (1999) that no single currency regime is
right for all countries or at all times.  This is also  the consensus by the multilateral institutions such as
the International Monetary Fund and the regional fora, including the APEC and ASEM.Under current
circumstances, the stability accorded by the ri nggit peg to the US dollar continues to benefit
businesses, providing a conducive environment by offering a degree of certainty in conducting theirday-to-day operations, while conferring efficiency gains in the form of lower transactions and hedging
costs.We are confident that the ringgit peg is sustainable as long as it is consistent with the
fundamentals of the Malaysian economy. To this end, BNM remains vigilant to economic
developments, domestic and international, and will take appropriate measures to ensure the peg
remains sustainable.
Question
33. It is said that the Malaysian Government considers the Islamic financial institutions to be very
important and the Financial Sector Masterplan has the aim of Islamic financial institutions occupying
as much as a 20% share, in terms of the total asset and total lending in the country.  In this respect, is
it correct in understanding that Malaysia will not discriminate against any conventional financialinstitutions when achieving such a goal?WT/TPR/M/92/Add.1
Page 14
Answer
Yes, there is freedom of choice to consumers in deciding to use conventional or Islamic banking
facilities.  BNM only provides an environment that will facilitate the enhancement of efficiency of
both Islamic and conventional banking.
Malaysia implements a dual banking system where the conventional and Islamic banking systems
operate in parallel. Malaysia believes that by having a dual banking system, it would provide better
and more efficient financial services to its multi-racial and multi-religious population.  Recognizingthe potential of the Islamic financial system, the FSMP outlined the vision, objectives and
recommendations to enhance and further develop the Islamic banking and takaful industry.
Furthermore, the conventional and Islamic financial institutions have their respective roles to play in
ensuring that the objectives laid down in the FSMP are achieved.  The implementation of the
Malaysian dual banking system has proven that both conventional and Islamic financial institutionscould co-exist and operate in a commercially viable manner.
Question
What is the Malaysian Government’s view on the role of both the conventional financial institutions
and Islamic financial institutions, and how does it consider that these two different financial
institutions co-exist and operate in a commercially viable manner?
Answer
Both conventional financial institutions and Islamic financial institutions would play a complementary
role in supporting the overall financing needs of the Malaysian economy.  In addition to the two
specialized Islamic banks, 47 conventional banking institutions actually participate in the Islamic
Banking Scheme and provide a whole range of Islamic banking products.  The overall objective for
co-existence of conventional and Islamic financial institutions is to ensure that the financial system is
effective in supporting the needs of the economy, that is able to provide a broad range of products andservices to meet the needs of the customers who are becoming increasingly demanding and
sophisticated.
Question
Also, what would be the demarcation between go vernment-owned financial institutions and private
financial institutions in the field of lending to small and medium-sized enterprises or financing forinfrastructure development?
Answer
The role of private banking institutions in providing financing to selected sectors of the economy,
such as the small- and medium-sized enterprises a nd for infrastructure development, will continue to
remain crucial.  However, while ensuring that these sectors have access to adequate financing, it isequally important that such provision of financing is consistent with the objective of developing an
efficient banking sector.  Therefore, in line with the FSMP, mechanisms will be put in place to
minimize distortions on the efficient functioning of the provision of financing by the banking sector to
these sectors.  This will include, amongst others, enhancing the role of the Credit Guarantee
Corporation in an expanded guarantee system, undertaking measures to enhance the capabilities,efficiency and effectiveness of the development financial institutions, and encouraging theWT/TPR/M/92/Add.1
Page 15
development of the bond market to provide borrowers with an alternative source of long-term
financing.
Therefore, there will not be any clear demarcation between government financial institutions and
private banking institutions in extending loans to these sectors as both types of institutions will
complement each other in supporting the financing needs of these two sectors.
EUROPEAN UNION
I .   E c o n o m i c  E n v i r o n m e n t ;   ( 2 )   M Ain Policy Developments;  (i)  Macroeconomic policies;
(a)  Monetary and exchange rate policies
Question
1. (paras 11, 12)  In terms of macro-economic policies with a trade angle, Malaysia’s use of
capital controls in the period after the East Asia crisis is perhaps the most significant.  The reportgives quite a lot of emphasis to the use of capital co ntrols.  It would have been interesting to receive
more information as to whether the policy was successful or justified:  comments from the media and
from economists on the policy have varied widely: some  hailing its wisdom, others the risks attached.
Answer
In analyzing the use of exchange controls, it is important to understand how the measures affect
transactions, and the specific conditions under which controls were introduced.  In the Malaysian case,
the selective exchange controls were adopted as part of a comprehensive macroeconomic package to
address emerging risks, restore stability as well as promote economic recovery.  Policy initiatives
would only yield the desired results in a stable environment.  As intended, the selective exchange
controls and the fixed exchange rate were successful  in stabilizing the domestic financial conditions
and facilitated the resumption of economic activities.  The measures also reduced vulnerability of the
Malaysian economy to speculative attack against its currency by ensuring that the ringgit is no longeravailable for currency traders in offshore markets.  The stability accorded by selective exchange
controls not only brought about an earlier economic recovery, but has contained the adverse effects of
the crisis on growth, employment, poverty levels and social conditions.
Success of the measures can be seen from restoration of exchange rate stability. With stable foreign
exchange markets, Malaysia was able to lower inte rest rates.  This consequently facilitated the
acceleration of reforms in the financial sector, and restoration of domestic and foreign investor
confidence.  With the imposition of the controls, Mala ysia had been able to lower its interest rates
back to the pre-crisis level from its peak level within 3.  The exchange controls had also given greater
autonomy to monetary policy to maintain a low intere st rate regime despite rising US interest rates.
Unlike other crisis-affected economies, Malaysia was able to engineer a smooth downward adjustmentin interest rates, thereby providing greater certai nty and stability for business undertakings.  The low
interest rates were crucial in facilitating the effectiveness of fiscal expansion in the recovery policy
package.
Initial negative perceptions and reactions to the exchange controls were reversed once there were
greater understanding and appreciation of the controls and its objectives.  For example, the removalfrom the Morgan Stanley International (MSCI) index was temporary and reinstatement took place in
May 2000.WT/TPR/M/92/Add.1
Page 16
As the selective exchange controls were designed in a way that FDI is not affected by the new
changes, the multinational companies continued with their long-term investment in the country.  FDIwhich amounted to US$2.7 billion in 1998, increased significantly to US$3.9 billion in 1999 and
stabilized at that level in 2000.  The value of applications received for manufacturing investment from
foreign investors also increased significantly to US$7.8 billion in 2000 (1999:  US$2.4 billion), while
approvals increased to US$5.2 billion (1999: US$3.2 billion).
For a small open economy such as Malaysia, the exchange rate is a very important price.  Large
fluctuations in the exchange rate can have serious consequences on the performance of the economy,
especially when trade accounts for about 200% of Malaysia’s GNP.  In this regard, the stability
accorded by the measures had provided a conducive environment for businesses by offering a degree
of certainty in conducting their day-to-day operations.
III.  Trade Policies and Practices by Measure;  (1)  Introduction
Question
2. (para. 3)  The report places emphasis on the possibility that membership of regional trade
agreements gives rise to trade diversion and notes this may be detrimental to Malaysia’s trade
partners.  It does not mention that trade diversion may also be detrimental to Malaysia.  Perhaps just
as important, it does not appear to present any evidence on the issue.  We would therefore like to
know if Malaysia has considered the possibility that the widening gap between average applied and
preferential tariff rates has increased the potential for trade diversion?  Does Malaysia have any
plans to avoid the detrimental effect of trade diversion in the future?
Answer
The gaps between the preferential rates and the current applied rates are not very wide.  Statistics do
not show trade diversion or that it has been detrimental to Malaysia’s trading partners.
(2)  Measures Directly Affecting Imports;  (i)  Registration, customs valuation, and procedures
Question
3. (para 15) The report states that Malaysia’s legislation on customs valuation has a provision
for minimum import values.  No extension of the implementation period of the WTO Agreement on
Customs valuation having been granted to Malaysia  beyond 1 January 2000, clarifications as to the
compatibility of this legislation with Malaysia ’s WTO commitments therefore would be very much
appreciated.
Answer
Although the Malaysian Customs legislation provides for a minimum import values, to date such
provision has never been applied.  Malaysia remains committed to the Customs Valuation Agreement.
Question
4. Would the Malaysian Government agree that, in the field of customs release and clearance,
although Malaysia has made impressive strides in re cent years, there is still scope for improvement
and further simplification?  Does Malaysia have any plans to streamline these procedures further,
and if so in what specific areas?WT/TPR/M/92/Add.1
Page 17
Answer
To improve customs clearance procedures, the Customs Department is undertaking the simplification
and modernization of customs procedures including enhancement of customs information system,
electronic data interchange and improved risk management techniques.
(ii)  Tariffs
Question
5. (paras 18-24) Malaysia’s reliance on tariffs as a source of tax revenue (5,8%) looks high for
a relatively advanced economy.  What plans does Malaysia have to reduce its dependence on tariffs as
a source of tax revenue, and more generally to reduce the levels of tariff bindings?
Answer
Tariffs would not be a major source of tax revenue as Malaysia is focusing more on sales tax and
service tax as its source of tax revenue.  Reduction in tariff bindings will be dealt with appropriately inthe context of negotiations on market access for non-agricultural products.
Question
6. Could Malaysia please explain why tariffs have risen on alcoholic beverages but on other
selected food products tariffs have been eliminated?
Answer
The increase in tariffs on alcoholic beverages are based on health and moral grounds.
(iv)  Import prohibitions, restrictions, and licensing;  (b)  Import approval and licensing
Question
7. (para. 42)  It seems like Malaysia has increasingly resorted to import licensing as a means of
monitoring imports.  Would Malaysia agree that this could possibly act as a barrier to trade?
Answer
Import licences are meant for regulating and monitoring inflow of goods to Malaysia.  Licences are
required to ensure adherence of rules, standards and regulation pertaining to health, security and safety
and the orderly development of industry.  Import licences are issued by competent authorities or lead
agencies, which are in charge of its implementation.  The Government from time to time, reviews the
licensing requirement in line with Mala ysia’s objective of facilitating trade.
Question
8. Table III.3 is listing different product groups subject to import licensing and the competent
authorities in charge of its implementation.  It remains unclear, however, which exactly are the
product groups subject to discretionary licensing and which exactly are the criteria for the issuance of
such licences, beyond those permitted by the WT O Agreement on import licensing procedures.  We
would be grateful for some further clarifications in this respect.WT/TPR/M/92/Add.1
Page 18
Answer
Same response as in Q.7.
(vi)  Government procurement
Question
9. (para. 50)  Malaysian authorities have indicated that Malaysia has yet to attain the level of
economic development that would enable it to be a party to the GPA agreement.  Has Malaysia set
itself any specific target level of economic de velopment upon which Malaysia will re-examine
prospects of becoming an observer to or a member of  the GPA?  Does Malaysia not think that it owes
it to its taxpayers and voters to ensure that public purchasing is done in the most cost effective
manner, i.e. through open and competitive procedures according to the GPA?
Answer
Government Procurement is a strategic policy instrument in pursuance of Malaysia’s socio-economic
and development objectives.  Hence Malaysia will not be a member of the GPA until it has achieved
these objectives.  Malaysia has adopted its procurement practices on the principles of transparency,
public accountability, value for money, open and fair competition based on national policies, modeled
UNCITRAL Model Law.  Thus, public purchasing is done in the most cost-effective manner through
open and competitive procedures as set out in the Treasury’s Instructions and Treasury circular letters.Clearly one does not have to be a member of the GPA to follow open and competitive procurement
procedures.
Question
10. (para. 51)  The para. informs about Malays ia’s government procurement procedures.  We
would be grateful to receive further clarifications as follows:  How does Malaysia guarantee the
transparency of its procurement procedures?  At w hat point in the future does Malaysia foresee a
revision of the Acts
1 covering government procurement?  Coul d Malaysia provide more information
about the "Treasury Instructions" and "Treasury Circul ars Letters" that "clarify and improve certain
policies, rules and regulations"?  How frequently are these Treasury documents published?  Although
the report states that federal procurement regulations generally apply to procurement by various
levels of government, "with concurrence of the Mi nistry of Finance, local government authorities and
statutory bodies are allowed flexibility in a dopting and adapting financial regulations".  Can
Malaysia please indicate how this "flexibility" is interpreted, and whether it is done so in a
transparent manner?
Answer
Malaysia’s procurement procedures are transparent.  The Treasury Instructions (TI) detail financial
and accounting procedures and encompass the regulations that need to be adhered to in managingGovernment funds for various uses, including procurement.  It is available to the public,  and can be
purchased.
Treasury circular letters are issued periodically to clarify policies, rules and regulations.  The Treasury
Circular letters can be accessed by the public through the Malaysian Treasury’s homepage at
http//www.treasury.gov.my.
                                                     
1 The Financial Procedure Act 1957 (last revised in 1973) and the Government Contracts Act 1949 (last
revised in 1972).WT/TPR/M/92/Add.1
Page 19
Regarding the flexibility given to statutory bodies, local authorities and Non-Financial Public
Enterprises (NFPEs) in adopting federal procurem ent regulations, these Statutory Bodies are formed
under different Acts of Law and NFPEs are established under the Company’s Act and as such, are
answerable to their respective Boards of Directors.  They will have their internal procedures for the
management of the funds used for procurement which are derived from their own sources.  However,
if the funds come from the federal government, they will have to follow federal procurement
procedures.
Question
11. (para. 54)  What kind of joint ventures (in terms of level of Bumiputera or local participation)
must be formed for foreign companies to carry out works?  Are the joint venture requirements set out
in law and/or in the tender notices?  Does the fo rm of joint venture affect the awarding of the
contract?
Answer
For works contracts, foreign companies are requested to form joint venture with local companies.  The
level of Bumiputera or local participation in the joint venture will be highlighted in the tender notices
or tender documents.  If the form of joint venture is in accordance with the tender requirements, then it
will not affect the awarding of contract.
Question
12. (para. 56)  Two committees (Technical and Financial) pre-evaluate and submit tenders to the
Government Procurement Boards according to pre- determined criteria and weightage for evaluation.
Could Malaysia please inform how it ensures the transparency of these criteria and their weightage?
Are they made public with the tender notice?  In cases when tenders are international (when goods
are not locally available), do Malaysian law/ authorities grant equal treatment among foreign
companies, regardless of origin?  If yes, is equal treatment set out in Malaysian procurement law? If
no, is there a set basis for preferential treatment among foreign suppliers?
Answer
Pre-determined criteria and weightage for evaluation is a critical element in tenders.  All criteria are
highlighted in the tender document.  The public may obtain a copy of the tender document at the
tendering agency’s offices when tender notices are published in the newspapers or posted on theinternet.
International tenders are evaluated on an equal treatment basis regardless of country of origin, as set
out in Treasury circulars.
(3)  Measures Directly Affecting Exports;  (vi)   Export finance, insurance, and guarantees
Question
13. (para. 87) According to the statement made in the report, the current ECR (Export Credit
Refinancing) scheme provides for a yearly interest rate of 3,5%, which is 0,46% lower than the
Banker’s Acceptance Rate.  However, the authorities do not consider this to be an export subsidy.  We
would welcome it if the Government could give any justification for this assessment.WT/TPR/M/92/Add.1
Page 20
Answer
The interest rate of the ECR facility is based on the average bankers’ acceptance (BA) rate of ten
major banks in Malaysia.  While the BA rate tends to change frequently, the ECR rate will be adjusted
only if the spread between the BA rate and the ECR rate changes significantly.  Currently, the ECR
rate is 3.5%, marginally above the average BA rate of 10 major banks which is 3.38%.  As the ECR
rate could be slightly below or above the BA rate, the Government does not consider this to be an
export subsidy.
(4)  Measures Affecting Production and Trade;  (ii)  Taxation and tax measures;  (a)  Direct
taxation
Question
14. (para. 98) The report refers to some exceptions fr om the national treatment in the field of tax
incentives.  We would like to receive any compleme ntary information on approvals of foreign-owned
companies incorporated in Malaysia for the provident fund scheme, which was not available upon the
drafting of the report.  In addition, annuities purchas ed from foreign-owned life insurance companies
are excluded from personal tax exemptions compared to domestic products.  Could Malaysia please
indicate, for both cases, why national treatment is still absent?
Answer
Private provident fund scheme - Presently, there are 93 foreign-owned companies incorporated in
Malaysia which have been given approval to operate their own provident fund schemes.  The issue of
national treatment does not arise.
Annuity scheme - an annuity scheme is a very new investment product to both the Malaysian public
and Malaysian life insurers.  Therefore, the tax incentive is a very important element to promote the
development of this product.
(iv)  Standards and other technical requirements
Question
15. (para. 109)  The report states that "In addition to national and international standards,
various kinds of standards exist and are used in Malaysia.  For example, standards established by
selected bodies such as the ASTM, API, NFPA, ASME, and SAE are used in certain sectors".  Could
Malaysia please inform if any European standards ex ist and are used in Malaysia and whether, when
using the afore mentioned American standards, equivalent European standards, if such exist, can be
used.
Answer
For regulated products the decision to accept a particular standard is either specified in the applicable
regulation or is determined by the regulatory authority.  In the latter case, there is a possibility of theacceptance of equivalent European standards and this is determined by the authority responsible.  In
the voluntary sector the use of European standards is common and is based on market considerations.WT/TPR/M/92/Add.1
Page 21
(vi)  Intellectual property rights
Question
16. Could Malaysia please indicate whether or not its legislation grants a defined period of time
for the protection of undisclosed information.  If so, we would be grateful for the time span.
17. We also interested in receiving a definition of undisclosed information in Malaysia’s
legislation.
Answer
Generally, the protection of undisclosed information in Malaysia is laid down under the rules of
common laws and equity.  Any natural person or legal entity may not disclose trade secrets in his or
its possession in a manner that is contrary to honest  practise in trade.  A commercial or industrial
activity shall be considered secret if, due to its nature, it is not known, it draws its commercial value
from its confidentiality, reasonable measure have been taken to maintain its confidentiality, or it is noteasily accessible to an ordinary person having skill in the art.  Disclosure shall include making use of
information, tests or other secret information presen ted to the competent authorities in order to obtain
a marketing authorization necessary for pharmaceuticals and agricultural products containing new
chemical material provided that a tangible effort was furnished to obtain such products.
Question
18. In addition, we would appreciate it if Malaysia could explain how its legislation defines data
submitted to governments or governmental agencies.
Answer
Data submitted to governments or governmental agencies which is considered as undisclosed
information will get protection of undisclosed information as laid down under the rules of common
law and equity and Official Secrets Act 1972.
IV.  Trade Policies by Sector;  (4)  M
ANUFACTURING ;  (iv)  Key subsectors;  (a)  Automobiles
and their parts
Question
19. (para. 26)  The report notes the use of local content agreements and high tariffs to protect the
vehicle industry and argues that its poor export performance may indicate "a certain lack of external
competitiveness".  The very high levels of protection (tariffs 42% to 300%) in themselves seem tostrongly suggest a very poor level of competitiveness.  We would be grateful if Malaysia could
elaborate on any possible plans to reduce the levels of protection in the country’s vehicle industry.
One might think of, for example, lowering tariffs to increase the level of competitiveness.
Answer
Malaysia is currently reviewing its automotive policy with a view to inject gradual competition into
the industry.  The review among others include the tariff structure.
Pursuant to the extension granted by the Goods Coun cil, Malaysia will phase-out local content policy
in two stages.  In stage one, Local Material Cont ent Policy and 11 items in the Mandatory DeletedWT/TPR/M/92/Add.1
Page 22
Items (MDI) list will be abolished effective 1.1.2002.  The remaining 19 items in the MDI list will be
phased-out on 31.12.2003.
Question
20. (para. 28)  We note that Malaysia is to phase out current local-content requirements on
automobiles by 31 December 2001.  This target being very close, we would be grateful to receive
some information about Malaysia’s intentions as to the elimination of these measures.  Does Malaysia
agree that given the current market shares of th e local manufacturer (79% of the total automobile
market and 93% of the passenger car market) a further extension of these measures would be difficult
to justify?
Answer
Same responses as in Q.19
(5)  Services;  (iii) Financial services;  (a)  Overview
21. (para 45)  What is the content of the Capital Market Masterplan, which aims at further
deregulation and liberalization?  We would in particular like to know if it does include the removal of
foreign equity ceilings in brokerage firms, of rest rictions on foreign portfolio investment in domestic
companies and on IPOs to Malaysian investors?
Answer
Under the Capital Market MasterPlan (CMP)2, the issue of deregulation and liberalization is placed
under strategic initiatives number 4 - to develop a strong and competitive environment for
intermediation services. Specifically, strategic initiative 4.4 states that the Securities Commission (SC)
would adopt a pragmatic programme for liberalization, supported by appropriate safeguards.  This is
in tandem with the general national stance on dere gulation and liberalization whereby the emphasis is
on both the need for continued commitment to liberalization, but with careful consideration of the
socio-economic aspects of globalization.  The liberalization strategy under CMP entails:
- A co-ordinated programme for liberalization across all sectors in the capital market to 
ensure an orderly and harmonized transition process;
- Strengthening-including facilitating the formation of strategic partnerships and the use
of electronic means to enhance the efficiency, reach and cost-effectiveness of capital 
market services-to be implemented immediately;  and
- Ensuring that the implementation and sequencing of liberalisation measures are 
supported by the appropriate safeguards for maintaining investor protection and 
market integrity.
In terms of the implementation of the CMP, it should be noted that recommendations pertaining to
liberalization would be implemented in Phase 2 (2 004-2005).  As indicated in the CMP, appropriate
preparatory measures must precede the facilitation of greater competition within the domestic market,
so as to enhance the resilience of market participants and reduce the severity of economic
displacement arising from a sharp increase in competi tive pressures.  Such a strategy is also meant to
provide a certain amount of time and opportunity for the relevant market participants to prepare and
respond to the challenges posed by a more open market access.
                                                     
2 The CMP is available at the Securities Commission’s homepage at http://www.sc.com.myWT/TPR/M/92/Add.1
Page 23
Foreign equity participation in domestic stockbroking companies
Recommendation 85 of the CMP states that foreign equity participation in domestic stockbroking
companies will be liberalized in stages beginning from 2003. Malaysia currently allows up to 49%
foreign ownership in domestic stockbroking compan ies.  In the intermediate term, the formation of
strategic alliances with suitable foreign intermediari es within these parameters is encouraged by the
Government and the SC, as this will enable Malaysia n-owned stockbroking institutions to more firmly
strengthen their domestic position, while upgrading the level of domestic skills through technicalagreements with the foreign partner.  The CMP further clarify that in 2003, towards the end of Phase 1
of the Masterplan, a limited number of majority foreign-owned stockbroking institutions will be
allowed to operate in the Malaysian capital market, through the purchase of existing licensed
stockbroking companies and subject to other conditions as may be determined by the SC.
In Phase 2 of the CMP, covering 2004-2005, the SC will allow further liberalization of foreign equity
participation limits in the stockbroking industry.  However, any liberalization, including an
acceleration of this process, will be undertaken after a careful assessment of market readiness.
Restrictions on foreign portfolio investment in domestic companies
The overall regulation of foreign ownership and control of the country's major economic activities is
under the jurisdiction of the Foreign Investment Committee (FIC), Economic Planning Unit of thePrime Minister’s Department. In regulating the acquisition of certain assets or interests, mergers and
take-overs of companies and businesses in Malaysia, the FIC implemented guidelines that are
generally applicable to:
- Any proposed acquisition by foreign interests of any substantial fixed assets in 
Malaysia;
- Any proposed acquisition of assets or any interests, merger and take-over of 
companies and businesses in Malaysia by any means, which will result in ownership or control passing to foreign interests;
- Any proposed acquisition of 15% or more of the voting power by any one foreign 
interest or associated group, or by foreign interests in the aggregate of 30% or more of
the voting power of a Malaysian company and business;
- Control of Malaysian companies and businesses through any form of joint-venture 
agreement, management agreement, and technical assistance agreement or other 
arrangements;
- Any merger or take-over of any company or business in Malaysia whether by 
Malaysian or foreign interests;
- Any other proposed acquisition of assets or interests exceeding in value of 
RM5 million whether by Malaysian or foreign interests.
Any proposal that falls within the above criteria must be submitted to the FIC for its approval. In
addition to the FIC regulations, the regulators in the financial services sector impose its own
restrictions in relation to foreign participation in th e business entities that operates within the financial
services sector.  In this context, the banking and insurance industry falls within the jurisdiction of theCentral Bank-Bank Negara Malaysia.WT/TPR/M/92/Add.1
Page 24
As for the capital market, apart from the equity  participation in stockbroking firms, the CMP
recommends other steps towards reducing the restrictions on foreign portfolio investment in domesticcompanies that are intermediaries in the capital market, specifically relating to the venture capital
industry, derivatives market and investment management industry.
Under recommendation 32, SC is of the opinion that foreign ownership restrictions placed on venture
capital companies should be liberalized to allow for foreign equity participation of up to 100%.
However, where the management company has foreign equity participation of 70% or greater, thefunds managed should only be subscribed by non-residents.  This recommendation is to be
implemented in Phase 1 (2001-2003)
In the derivatives market, equity ownership requirements of futures broking firms will be liberalized
to allow foreign majority ownership by 2003 as indicated under recommendation 57 of the CMP.
Under recommendation 100 of the CMP, restrictions on the management of funds by foreign fund
management companies will be liberalized.  At present, only joint venture foreign fund management
companies are allowed to manage locally-sourced institutional funds (including Employee Provident
Fund (EPF)
3 funds) while wholly foreign-owned foreign fund management companies are only
allowed to manage foreign-sourced funds. In view  of the need for the pace of development to be
further increased, the SC will further liberalise the Guidelines on the Establishment of Foreign Fund
Management Companies  to allow all foreign fund management companies - whether joint ventures or
wholly foreign-owned - to source funds from the EPF,  subject to the eligibility requirements of the
EPF, beginning from 2002.  As a move to develop the domestic investment management industry, the
mandates given to foreign-owned investment managers will include a condition that both local and
regional mandates be managed within Malaysia.
As for unit trust management companies, recommendation 101 states that foreign ownership
requirements will be liberalized to allow foreign majority of unit trust management companies from2003.  At present, the unit trust industry - the retail segment of the investment management sector - is
subjected to a 30% restriction on foreign ownershi p.  In view of this, the SC will implement a
programme for the gradual liberalization of the industry.  As a first step, there will be a review of
foreign ownership restrictions placed on investment management companies operating collective
investment schemes such as unit trust funds.  This wi ll be done with a view to liberalizing the foreign
equity ownership limits in such companies from 2003, contingent on an assessment of market
readiness by the SC.
IPOs
Under the Securities Commission Act 1993, the SC is the single regulator for all fund raising activities
in Malaysia, whereby it is the approving and the registering authority for prospectus in respect of allsecurities other than securities issued by unlisted recreational clubs. Proposal for IPOs therefore must
be submitted to the SC for its approval.  Under recommendation 22 of the CMP, the breath of listings
in the Malaysian equity market will be gradually widened to include listings of foreign companies.
The process of allowing foreign listings on the Kuala Lumpur Stock Exchange (KLSE) will be
implemented over three stages, with an assessment of market readiness and impact at each pointbefore proceeding to the next stage.
                                                     
3 The Employees Provident Fund (EPF) is a national social security organisation operating through a
provident fund in Malaysia. The EPF is a scheme which provides retirement benefits for members throughmanagement of their savings in an efficient and reliable manner. The EPF also provides a convenient frameworkfor employers to meet their statutory and moral obligations to their employees. http://www.kwsp.gov.my/WT/TPR/M/92/Add.1
Page 25
The SC will allow qualified Malaysian-owned foreign-based companies to seek a primary listing on
the KLSE in Phase 1.  In relation to this, the SC will revise its Guidelines for Public Offerings of
Securities of Foreign-Based Companies on KLSE .  The SC will also work with industry in formulating
appropriate strategies to attract the listings of qualified Malaysian-based foreign-owned companies.
(b)  Banking
Question
22. (para. 52)  What kind of anti-trust regulations  are contemplated?  Would they include the
granting of new banking licences to foster the contestability of the market?
Answer
The anti-trust regulations will describe the process by which abuses are defined and dealt with by the
Government.  Such regulation will address monopolistic behaviours of banking institutions and
complement the overall initiatives to be taken towards developing a comprehensive consumerprotection framework.  These regulations will be developed over the medium term as banking
institutions begin to specialize and gain strength and dominance.
The pre-requisites for granting of new banking licences have been clearly stated in the FSMP.  Once
the domestic banking institutions have built greater capacity and capability to compete, greater
liberalization measures will be introduced progressively, beginning with leveling the playing fieldbetween domestic banks and incumbent foreign banks.  New foreign competition may be introduced
subsequently if certain safeguards are met.
(c)  Insurance
Question
23. (paras 59, 60)  Would Malaysia agree that there is a contradiction between the fight against
unfair trade practices, including monopolies, and mandatory cessions?  Does the Government have
any plan to reduce further the level of mandatory cessions?
Answer
Under the FSMP, measures will be undertaken to phase out the voluntary cessions to Malaysian
National Reinsurance Berhad (MNRB).  This will be achieved through periodic reviews of the
voluntary cession agreement under which the ce ssion to MNRB are made, with a view to
progressively reducing the level of cessions.
(iv)  Telecommunications;  (a)  Structural change in the telecommunications sector
Question
24. (para. 64)  Could Malaysia please indicate how have prices evolved in the period and what
are the plans to further increase the penetration rate?
Answer
Malaysia’s tariffs for fixed line market is price-capped by the Government in-line with Government’s
policy objective to provide affordable services to the people.  We are planning to institute cost-
based/market determined pricing in the near future.WT/TPR/M/92/Add.1
Page 26
In the mobile market, pricing is market-based.
Question
25. (para. 65)  Please describe how was the authority to provide back-bone infrastructure in the
Multimedia Super Corridor granted?
Answer
The Government decided to get the MSC off the ground the soonest possible.  Thus, it was logical to
ward the responsibility to provide services to Telekom Malaysia Berhad, which had the necessarycapacity financial, network and international connections.
Question
26. (para. 66)  Please inform if the types of services presented in Table IV.9 are defined in the
law?  We would also like to know if apart from the distinction made in para. 70, this table is the basis
for categories of licences?
Answer
The services presented in Table IV.9 are based on types of services.  However, a new structure based
on the categories in para 70 namely NFP, NSP,  ASP and CASP has been adopted under the CMA
1998.
The licensing regime under the CMA is based on network and application services rather than
telecommunications and broadcasting.  Licences are granted to four categories of service providers:
network facilities providers (NFPs), network services providers (NSPs) application services providers
(ASPs), and content application services pr oviders (CASPs).  The Minister for Energy,
Communications and Multimedia has discretion in granting licences, determining policies and issuing
regulations,  while the CMC advises the Minister and enforces policies and regulations.  Since 1997,
no new licences have been issued for basic and mobile telephony services.
(b)  Policy objective and regulating authority
Question
27. (para 68)  We note that the CMC is responsible for encouraging competition and ensuring an
"orderly and efficient development of telecommunicati ons services".  Could Malaysia please further
elaborate on this?
Answer
Under the new licensing regime, a more light-handed approach has been adopted especially with the
introduction of the concept of class licensing.  Such licensing structure is expected to lead to a more
orderly development of the telecommunications services as well as to encourage the development of
more competitive market environment particularly for the provisioning of applications services.WT/TPR/M/92/Add.1
Page 27
(c)  Licences and their conditions
Question
28. (para. 70)  We understand that while a Commu nications authority has been created, the
Ministry retains some regulatory powers (in particular issuance of licences).  How is independence of
decision achieved for those regulatory powers when one of the operators is still government owned?
In the same para., it is indicated that no new licence has been issued since 1997 for basic and mobile
services.  We would be interested to know if this is  because the Ministry does not want to grant more
licences?  And if so, what is the rationale?  Also, for other services (such as internet services, satellite
services) is there any restriction on the number of suppliers?
Answer
Though one of the operators is still Government owned, this has not in any way affected the
independence of the Ministry when addressing issues of licensing.  This is because all licences issuedcarry similar terms and conditions.
It should be clarified that it is only for Network Facilities that no new licences were issued.  This is
due to the fact that there is an excess capacity for the core network facilities and the market for mobile
services is highly competitive.  However, 42 new licences for the provisioning of applications services
were issued in 2001.
For Internet Services, since it falls under class licensing, there is no restriction as to the number of
service providers.  As for direct-to-home satellite broadcast, the current restriction applies.  Kindly
refer to CMC’s website at www.cmc.gov.my  for further details on number of service providers under
the ASP class.
Question
29. (para. 71)  The report states that "An individual licence is subject to a higher degree of
regulatory control than a class licence".  Can Malaysia please explain what that higher level ofcontrol mean?  Second, why are foreign companies prevented to get a class licence (and how is a
foreign company defined for that purpose)?  A nd third, what is the procedure to get a license
(duration, modalities, result of the procedure)?
Answer
The above conditions apply to all individual licences.  However, in the case of class licences, which
are mainly in respect of value added services, the Minister may permit foreign individuals or foreign
companies to be registered as class licensees.  Generally this will be for a good cause or public
interest.  [Regulation 23(2).  Communications and Multimedia Regulations (Licensing) 2000].
Generally both the individual and class licensees are subject to the Communications and Multimedia
Act and all the regulations made there under.  Licence conditions imposed on individual licence aremore elaborate.  In comparison class licences only need to be registered.
Foreign individuals who are not permanent members and foreign companies may be allowed to
register for class licences for a good cause or if it is in the public interest.
The procedure for application in provided in  the Communications and Multimedia Regulations
(Licensing) 2000.  Generally applications must be made on prescribed form and contain informationthat is specified.  All applications must be submitted to the Malaysia Communications and MultimediaWT/TPR/M/92/Add.1
Page 28
Commission (MCMC).  The MCMC may request to additional information whilst processing the
applications.  The MCMC then makes a recommendation to the Minister (Minister of Energy,Communication and Multimedia) together with recommendations on special or additional licence
conditions.  The Minister may agree or disagree with the recommendations of MCMC.  If the Minister
refuses to grant the licence, the applican t will be told the reason for the refusal.
The definition of foreign company is as in the Companies Act 1965.
Question
30. (para. 72)  We are interested to learn about the rationale for authorities to find that the actual
number of mobile suppliers is adequate?
Answer
Malaysia decided on the number of mobile suppliers based on comparative analysis between countries
basing on similarities in socio-economic factors.
Question
31. (para. 73)  Could Malaysia give more detailed information regarding the conditions under
which foreign ownership is allowed to exceed 30%?  When does Malaysia expect the domestic
restructuring process to lead to further liberalization of the current foreign equity limit?
Answer
Any increase in the equity position above our WTO commitment is dependent on factors contributing
to our national interest.
Malaysia is working towards progressive liberalization to allow for the local suppliers to gain enough
capacity to face competition from global multinationals.
Question
32. (para. 74)  Please explain why the price-cap still applies to fixed line telephony?
Answer
The price-cap on fixed line telephony is to satisfy the government policy objective to provide
affordable services to Malaysians, especially the remote (rural) communities.
Question
33. (para. 75)  Could Malaysia please provide information about how and where "universal
services" defined, how the "the cost of providing universal service" has been computed, and wherethis computation can been consulted?
Answer
"Universal Services" is as stipulated under sect ion 202(1) of the Communications and Multimedia Act
Malaysia 1998 (Act 588).  It is to promote the widespread availability and usage of
network/applications services by the installation of network facilities and the provisioning of thesefacilities to the rural areas, underserved areas and underserved groups within the community.WT/TPR/M/92/Add.1
Page 29
Additional questions on the telecommunication sector:
33. We would be grateful if Malaysia indicates whether there are any provisions to ensure that
the major supplier, Telekom Malaysia Berhad does not abuse its dominating market position?  In
particular, are there any safeguards against cross-subsidisation and potential abuse of information it
gets from other suppliers?  And are there any rules on interconnection?
Answer
Telekom Malaysia Berhad, just as other licens ees is subject to the competition guidelines.
The Communications and Multimedia Act provides for the elimination of cross-subsidies
[Section 198(b)].
So far there have not been reported incidences on the abuse of information.
Question
34. Please also inform how numbe rs and rights of way are managed.
Answer
The Malaysian Communications and Multimedia Commission (MCMC) is vested with the powers to
control, plan, administer, manage and assign th e Numbering Plan and Electronic Addressing of
Network and Application Services as per the Communications and Multimedia Act 1998 (CMA),
Sect. 179-181.
On the ROW, the CMA spells out the rights of Network Facilities Providers and also safeguards
public rights and safety as per Sect. 214-230.
The CMA may be viewed at: www.cmc.gov.my , the official site of the MCMC.
(v)  Transport;  (a)  Air transport
Question
35. (para. 80)  Could Malaysia please indicate if  foreign enterprises are allowed to administer or
operate airports, or provide navigation and air traffic services?  What other auxiliary services canthey operate for their own benefit, and under what conditions?
Answer
The Government of Malaysia currently does not permit foreign enterprise to administer or operate
airports, or provide navigation and air services.
(b)  Maritime transport
36. (para. 83)  We would appreciate it to receive some clarifications on taxation.  Is income of a
shipping company derived from the operations of Malaysian ships (registered as such under the
Merchant Shipping Ordinance 1952, amended) exempted from tax?  If so, is such incentive granted to
residents only?  To which extent can additional deduction be made for of freight charges incurred by
a shipper in Malaysia and paid to a Malaysian incorporated shipping company for transportation onboard a Malaysian ship?WT/TPR/M/92/Add.1
Page 30
Answer
Tax exemption for income from shipping business.  Statutory income of a shipping enterprise, from
the business of transporting of passengers, mail, livestock or goods by sea-going Malaysian ships is
tax exempt.  In this respect the term "Malaysian Merchant Ships" means seagoing ship registered as
such under the Merchant Shipping Ordinance 1952 other than a ferry, barge, tug boat, supply vessel,
crew boat, lighter, dredger, fishing boat or other similar vessels.  Any dividend paid out of such and
exempt account is also exempted from tax.  There is no special additional deduction available fortransporting on a Malaysian ship.
Additional Questions on behalf of the European Union
II.  Trade Policy Developments;  (1)  Overview
Question
37. (para. 11)  The report states that Malaysia’s took measures to transform the manufacturing
sector into "a broad-based and internationally competitive sector".  This encompasses moving along
the value chain from assembly-based towards higher value-added activities.  Could Malaysia please
elaborate on its positive and negative experiences and lessons in its policies to create export growth
through higher value added manufacturing activities.  What has been the role of Malaysia's tariff
structure - and in particular tariff escalation - in this?
Answer
Tariff escalation has not been a policy tool in developing higher value-added activities.  The measures
taken to enhance competitiveness of the manufacturing sector are:
- promoting and targeting FDI into selected sectors;
- creating a more conducive business environment through upgrading 
infrastructure and streamlining administrative procedure;
- enhancing domestic capability in marketing;- training and retraining of work force;
- development and application of advanced technology.
2.  ASEAN
Question
38. Under the AIA arrangement, ASEAN countries are committed to immediately grant national
treatment to ASEAN investors and open up their industries for investment with some exceptions.  The
exceptions are contained in the Temporary Exclusion List (TEL) and Sensitive List (SL) for the AIA.
We would be grateful if Malaysia could indicate which are Malaysia’s exceptions, if any, under both
the TEL and the SL for the AIA.
Answer
Fishery - 30% equity.
Deep sea fishing - licensed to local investors only.WT/TPR/M/92/Add.1
Page 31
Exceptions on national treatment are corporate equi ty ownership, licensing requirements, ownership
of land and property, government procurement, flow of personnel, privatization projects, soft loansand grants.
III.  Sectoral Policies;  (6)  Measures on investment
Question
39. (para. 55)  Malaysia’s stated policy is to "maintain a liberal investment regime which is
characterised by liberal foreign equity ownership policies…".  Regarding the services sector,restrictions apply on FDI necessarily for establishment of commercial presence in essential sectors of
the economy, such as energy, finance, telecommunications and transportation.  We would like to ask
Malaysia to explain which measures are envisaged by the Government for further opening the
services sector.
Answer
Malaysia is committed to a gradual and progressive liberalization of the services sector,
commensurate with its development needs.
NORWAY
Question
1. In the report from the secretariat it is stated that the Government has taken steps or
announced plans to restructure the corporate and financial sectors and started a long-standing
privatization programme and labour market reforms.  Would the Malaysia authorities please provide
further information about the reform, especially in the labour sector?
Answer
Recognizing the need to strengthen the corporate sector, Malaysia’s corporate and financial
restructuring efforts continued to make real progress, despite the weak economic environment.  Todate, the merger programme for the banking sector has been successfully completed with 52 out of
54 banking institutions consolidated into ten banking groups and 98% of the total assets of the
domestic banking sector rationalised and consolidated.
As at 30 September 2001, Danaharta has acquired total loan rights amounted to RM48.08 billion
involving 2,943 accounts in its portfolio.  Out of the total, RM20.13 billion are NPLs acquired fromfinancial institutions at an average discount of 55% to their loan rights acquire (LRA) value.
Recovery actions have been initiated on RM40.05 billion (gross value of RM42.02 billion) or 83% of
the total portfolio of which the expected recovery rate for these NPLs is 57%.  A bulk of the
remaining NPLs will be restructured by the end of this year.  Up to 30 September 2001, Danaharta has
distributed on an accumulated basis RM7 billion in cash and 36.6 million units of securities at parvalue to financial institutions.  Since inception, Danamodal has injected RM7.59 billion to recapitalize
10 financial institutions.  As at end-October 2001, capital injection by Danamodal remained at
RM3.7 billion.
As at end-October 2001, the Corporate Debt Restructuring Committee (CDRC) has resolved 36 cases
amounting to RM28.2 billion.  At the same time, there are 26 outstanding cases with total debts ofRM28.2 billion with the CDRC of which 6 are previously resolved cases but currently being revised
and 6 cases being restructured by Danaharta.WT/TPR/M/92/Add.1
Page 32
In the first half of the year, the reform of the corporate sector was affected by the economic
slowdown, which resulted in weak market conditions  and difficulties in asset disposal.  Hence, in
order to ensure corporate restructuring exercises rema ined on tract, the Government had to step in to
facilitate this process as well as to ensure that restructuring schemes were credible, workable and not
detrimental to future stability.  This was evid ent with a number of large companies undertaking
rigorous restructuring exercises, in terms of management and ownership structure, disposal of non-
core business and assets.  Furthermore, fears of corporate restructuring exercises derailing after11 September attacks were unfounded as major corporations continued to make further inroads in their
restructuring exercises.  As at 30 November 2001, CDRC has successfully completed a debt
restructuring scheme for Sistem Transit Aliran Ringan Sdn Bhd ("STAR")  and Projek Usahasama
Transit Ringan Automatik Sdn. Bhd.  ("PUTRA") a nd their lenders involving debts outstanding of
approximately RM5.5 billion.  The successful resolution of the debt restructuring scheme is estimatedto reduce the level of NPLs in the banking system  by RM2.9 billion or 0.7%% on a net 6-month basis
(excluding loans extended by offshore banks, development finance institutions and other non-bank
institutions).
Regarding labour market reforms, Malaysia continues to implement measures to increase labour
productivity including productivity-linked wage system, flexible hours and minimum wage system inselected sectors of the economy.
Question
2. Could Malaysia explain in which areas they have special concerns about transparency in
government procurement?  Is it technical capac ity problems in implemen ting an agreement or are
there other special concerns we should be aware of?
The question is without prejudice to any other po ssible questions Norway may rise in our general
statement during the Trade Policy Review of Malaysia.
Answer
Transparency is one of our government procurement principles and it is entrenched in our rules and
regulations.  However, becoming a signatory to an agreement on transparency is an entirely different
matter.  Malaysia has consistently voiced its concern in the Working Group on Transparency in
Government Procurement and we do not intend to repeat all our concerns.  Suffice to say that inMalaysia government procurement is also used as a tool to achieve socio-economic developmental
objectives  Any such agreement should therefore enable the continuance of programmes to achieve
these objectives.  Additionally, the scope of the agreement should not be too broad that its obligations
too onerous and burdensome to follow.
HONG KONG, CHINA
Customs valuation;  (WT/TPR/S/92, p. 27, para. 15)
Question
1. It is mentioned that Malaysia's legislation has a provision for minimum import values, though
it has never been invoked.  We would be interested to know under what conditions this provision will
be invoked.WT/TPR/M/92/Add.1
Page 33
Answer
Please refer to answer in Q.3 of the EU reply.
Competition policy;  (WT/TPR/S/92, p. 66. para. 145)
Question
2. It is noted that guidelines were introduced to regulate competition in the telecommunications
sector.  In this regard, we would be interested to have more information on such guidelines, and to
know whether similar guidelines are also provided for in other sectors.
Answer
In the telecommunications sector, the introduction of the pro-competitive Communications and
Multimedia Act 1998 (CMA) has further enha nced the competitiveness of the industry.
The CMA has provisions which promote competition in the market place:
- The Application Service Provider licensing has opened up competition in the down
stream market where entry is not restricted.  Here only a class license is required
whereby it is akin to a pre-approved license.
- There are no foreign equity restrictions applicable for Applications Service Provider
License.  However, there are equity restrictions for the other licenses i.e. Network
Facility Provider, Network Service Provider and Content Applications ServiceProvider.  Intending participants have to set-up company in Malaysia.
- Last-Mile service facility provider is also open for new entrants.
The competition issue is well explained in the CMA (Part IV) and the Competition Guideline which is
accessible in the Malaysian Communications and Multimedia Commission web-site at :
www.cmc.gov.my.
Telecommunications;  (WT/TPR/S/92, p. 90, para. 73)
Question
3. It is noted that foreign equity participation in network facilities provider business is in
general capped at 30%, and higher foreign participation may be allowed on a case-by-case basis.  We
would like to know under what conditions equity level will be allowed to exceed 30%.
Answer
In general, foreign equity above 30% is allowed in cases where foreign participation will result in net
benefits to the country.WT/TPR/M/92/Add.1
Page 34
CANADA
III.  Trade Policies and Practises by Measure;  (1) Introduction;  (para. 2)
Question
1. According to para. 2, 33% of tariff lines are not bound, and for those lines that are subject to
bindings, bound rates often considerably exceed applied rates.  To improve predictability and stability
for Malaysian importers and foreign country exporters, are you considering binding more tariff lines
and reducing the gap between bound and applied rates?
Answer
Malaysia’s level of binding was 1% prior to the Uruguay Round negotiations.  This was increased to
65%, a significant increase by any standards.  Ceiling bindings have been allowed in tariff
negotiations as a way of encouraging greater scope of bindings which provides greater predictability
and yet provide flexibility for countries to increase tariffs.  In the case of Malaysia, the gap betweenapplied rates and bound have declined because of Malaysia’s unilateral reductions since the Uruguay
Round.  Malaysia will consider further bindings in the Doha work programme taking into account the
overall outcome of negotiations.
IV. Trade Policy by Sector;  (5)  Services;  (ii)   Policy objectives for the sector;  (para. 39)
Question
2. According to para, 39, the Government of Malaysia envisages liberalization under the
framework of the GATS in accordance with prevai ling domestic fundamentals and the ability of the
sector to accommodate changes without impinging on the orderly development of the sector.  Please
comment on whether you intend to seek significant liberalization in the telecommunications services
sector as part of on-going GATS negotiations.
Answer
Malaysia has already instituted measures towards a more competitive ICT industry.  Firstly, our
Communications and Multimedia Act 1998 has imputed provisions for a substantial pro-competitive
environment in the industry, including deregulation.  Malaysia has already opened up to 30% foreign
equity holding for basic services.  This would progressively be liberalised further.
(iii)  Financial services;  (para. 50)
Question
3. Restrictions on the opening of new branches and the installation of automatic teller machines
have been impeding the progression of foreign-owned banks in the retail banking sector.  Are you
considering lifting these restrictions to increase competition and allow foreign banks to offer the same
level of services to retail customers?
Answer
Once the domestic banking institutions have built greater capacity and capability to compete, greater
liberalization measures will be introduced progressively, beginning with the leveling of the playing
field between domestic banks and incumbent foreign banks in Phase II of the Financial Sector
Masterplan (FSMP).  This will begin with the removal of some of the restrictions on the existingWT/TPR/M/92/Add.1
Page 35
foreign-owned banks, including consideration to al low incumbent foreign banks to set up shared ATM
network.  These steps will be implemented gradually subject to achievement of specified milestones.
(iv)  Telecommunications;  (para. 65)
Question
4. According to para. 65, the Malaysian telecommunications sector is characterized by dominant
market players;  for example, Telekom Malaysia Berhad which holds 95% of the fixed line market,
and Telekom Malaysia which has a de facto monopoly to provide back-bone infrastructure in theMultimedia Super Corridor.  Do you plan to en sure that an asymmetric regulatory system is
established to deal with dominant carriers?  If yes, please explain.
Answer
Most countries which started off with the Government as the sole provider of telecommunications
services are now facing similar situations.  We ar e now promoting new entrants into the last mile
sector, which has the potential to reduce this monopolistic situation.
We are also aggressively implementing fair inter-connection arrangements to facilitate the other
operators to enter the fixed line market.
Nevertheless, the subscriber volume and rate of growth is far higher in the mobile market where there
are 5 players and Telekom Malaysia is not the biggest player in that market.
In the Multimedia Super Corridor, Telekom Malaysia was given the monopoly position to ensure that
there was speedy implementation of networks because Malaysia needed to get the MSC project off the
ground quickly and orderly, whilst maintaining the quality of network.  Thus, Telekom Malaysia was
given the mandate to do that due to their technical and financial capacity.
Now that the basic infrastructure is in place, th e Government is now planning to allow the other
Malaysian operators to enter this market too and rest assured, a pro-competitive environment will
reign in the MSC too.
(iv)  Telecommunications;  (para. 67)
Question
5. According to para. 67, a Multimedia Super Co rridor is being established with a view to
making Malaysia a major global centre for communi cations and multimedia information services.  A
footnote referenced to para. 67 states that within the Corridor, investors are eligible to duty-freeimports of multimedia equipment, income tax exemption, and investment tax allowance up to ten
years;  100% foreign ownership is allowed, fast-track processing of visa for foreign professionals
apply, and there are no restrictions on the number of professionals that can be employed per
company.  Please explain what licensing requirements would-be investors are subject to as part of this
initiative.
Answer
There are no licensing requirements to set-up operations in the MSC.  But, if services are provided to
customers, then the normal licensing requirem ents apply.  Please refer to the Malaysian
Communications and Multimedia Commission web-site for information on licensing matters:
www.cmc.gov.myWT/TPR/M/92/Add.1
Page 36
(iv) Telecommunications;  (para. 72)
Question
6. According to para. 72, no individual licenses have been issued since 1997 for fixed line and
mobile service providers because authorities consider the current number of providers as adequate.
Please clarify the procedure and criteria on which this decision is based.
Answer
Please refer to response to Q.3 of Hong Kong, China.
(iv)  Telecommunications;  (para. 73)
7. According to para. 73, foreign equity participation beyond 30% may be permitted on a case-
by-case basis.  Please explain the procedure used for evaluating each case.
Answer
Please refer to response to Q.3 of Hong Kong, China.
(iv)  Telecommunications;  (para. 76)
Question
8. According to para 76, Malaysia has not fully adopted the reference paper.  Please elaborate
on which rules are not yet in place to prevent major suppliers from engaging in or continuing
anti-competitive practices, as per para. 1 of the reference paper.
Answer
This issue is still being examined.
(v)  Transport;  (b) Maritime transport;  (para. 81)
Question
9. Para. 81 states that Malaysia has been promoting Port Klang as a hub and cargo
transhipment centre by expanding its capacity and designating it as a "free commercial zone".  Please
clarify what is meant by "free commercial zone".
Free Commercial Zone is a designated area that enables goods to be imported duty free for purpose of
re-export.  In the context of the Port Klang free commercial zone, it enables value added activities that
are meant for re-export to be carried out in the zone duty free.
(b) Maritime transport;  (para. 82)
Question
Para. 82 states that "seven federal ports and eight state ports in Malaysia are supervised by ten
authorities".  We understand that Kuantan Port and Teluk Ewa Jetty in Langkawi were privatized in
1998.  Are there plans to privatize other federal ports?  If yes, which ones?WT/TPR/M/92/Add.1
Page 37
Answer
The terminal operations at Kemaman Port is currently in the final stages of privatization.
AUSTRALIA
Automotive Sector
Question
1. In the wake of the 1997-98 Asian financial crisis, Malaysia increased MFN tariffs on
automobiles and automotive products, including incr easing duties on some completely built up (CBU)
automobiles by up to 300%.
a) Does Malaysia intend to take steps in the near future to reduce its MFN tariffs on these
products to the levels that were maintained previously during the pre-crisis period.  If so, when will
these tariff reductions be put into effect?
Answer
Malaysia is currently reviewing its automotive policy with a view to inject gradual competition into
the industry.  The review among others includes ta riff structure of CEPT, MFN tariff and the import
licencing system.
Question
b) Will Malaysia reduce its MFN tariffs in line with the anticipated reduction in CEPT tariffs
that is due under AFTA in 2005?
Answer
Same response as in Q.1 (a)
Question
2. Malaysia maintains a licensing system which limits the number of imported CBU vehicles.
Does Malaysia intend to increase the number of  licenses granted for the importation of CBU
automobiles?
Answer
Same response as in Q.1 (a)
Ad valorem  tariffs
Question
Malaysia maintains a number of mixed and compound du ties through its tariff schedule, especially in
the chemicals and metals sectors.  As part of it s development strategy, Malaysia is moving production
up the value added chain, but these types of tariffs generally support low value added producers.  The
use of ad valorem tariffs would assist in sending the right price signals to producers and would
achieve Malaysia's policy objectives.WT/TPR/M/92/Add.1
Page 38
3. Is Malaysia considering application of ad valorem tariffs only in its tariff schedule?
Answer
Compound duties are not in line with Malaysia’s industrial development strategy to encourage higher
value added industries.  In this context, the Government has already taken action to convert the
compound duties to ad valorem  duties.  This is clearly shown in the secretariat report that compound
rate was has been reduced from 4.5% in 1997 to 0.7% in 2001.
Halal Meat
Question
4. Australia is interested in obtaining detailed information on Malaysia's Halal meat
requirements, including specific details of the applicable legislation (act, section, etc.) and
regulations, and any other requirements or preconditions.
a) What are the existing requirements and conditions?
Answer
The requirements and conditions for halal food are based on established Islamic Law.  These
requirements and conditions are described under the "General Guidelines on the Slaughtering of
Animals and the Preparation and Handling of Halal Food" prepared by the Department of Islamic
Development, Malaysia.  The determination of and the confidence in the Halal status of food is areligious issue.  Establishments requesting accreditation for Malaysia Halal meat are subject to
inspection and verification.  This is stipulated in the guidelines.
Question
b) Are these existing requirements and conditions the same for all suppliers of Halal meat?
Answer
Yes.
Question
c) If different requirements exist for some suppliers, what is the basis for the application of those
different requirements ?  What conditions must be fulfilled by those suppliers in order to become
subject to the different requirements?
Answer
Not applicable.
Question
d) Have these requirements and conditions been made publicly available?  Would Malaysia
consider publication of a booklet that outlines all necessary requirements and conditions for Halal
meat certification?WT/TPR/M/92/Add.1
Page 39
Answer
The "General Guidelines on the Slaughtering of Animals and the Preparation and Handling of Halal
Food" is available.
Professional services/Legal services
Question
The liberalization of the professional services sect or will add stimulus to Malaysia's aim to develop a
knowledge-based economy (k-economy) .  A framework that provides for transnational professional
services and service suppliers will benefit trade and investment.
5. Will Malaysia consider opening further its markets to professional services provided by
foreign entities/individuals?
Answer
This will be considered in the current negotiations and any opening up of the market will be based on
the competitiveness of the domestic service providers.
Question
6. Will Malaysia permit foreign lawyers and law firms to practice foreign law in mainland
Malaysia;  enter into co mmercial association with Malaysia's lawyers and law firms;  and establish a
direct presence in Malaysia?
These changes would enable foreign lawyers to provide services to local and international clients on
their home/third country and international law, but not host country (Malaysian) law, except in
association with duly admitted Malaysian practitioners.
The "limited licensing" regulatory system for legal services promoted in the context of GATS
(S/CSS/W/67/Suppl.1/Rev.1) may be a regulatory model that could be considered by Malaysia.
(Note:  Foreign providers of legal services are currently permitted more liberal access in Labuan
only.  However, the majority of foreign commercial interest remains focused on mainland Malaysia.)
Answer
According to Malaysia’s current specific commitm ents on legal services, foreign lawyers and law
firms are allowed to practice only in the Federal Territory of Labuan, covering advisory and
consultancy services relating only to home country laws, international law and offshore corporation
laws of Malaysia.  Malaysia’s future commitments on legal services will be determined subject to the
outcome of the ongoing services negotiations.
Question
7. Will Malaysia broaden recognition of legal qualifications from foreign Law schools and
Universities?  For example, at present, qualifications form only 14 of 28 Australian University Law
Schools are recognized in Malaysia.WT/TPR/M/92/Add.1
Page 40
Answer
Malaysia will follow established procedures in the recognition of legal qualification from foreign law
schools.
UNITED STATES
Summary Observations;  (3)  Trade and Trade-Related Policies, Practices and Measures;
(para. 8)
Question
1. The Secretariat’s Report notes that there are several barriers to trade and investment that still
constitute potentially important distortions to competition and thus potential impediments to
Malaysia's long-term development. What is th e Government of Malaysia doing to increase
competition?
Answer
The Government recognizes the importance of competition and continuously reviews its policies and
measures aimed at enhancing competition at all levels of society.
(Para. 9)
Question
2. The Secretariat’s Report notes that as a consequence of "temporary" increases in rates in
1998, the average applied MFN tariff increased from 8.1% in 1997 to 9.2% in 2000.  This rise in tariff
protection was facilitated by the fact that one third of tariff lines are not bound and, even for those
lines that are subject to bindings, bound rates often considerably exceed applied rates.  This lack of
bindings, together with the gap between bound and applied rates, can impart a degree of
unpredictability to Malaysia's tariff.  Furthermore, the multiplicity of applied rates contributes to the
complexity of the tariff.  What is the Government of Malaysia doing to increase the predictability of itstariffs?
Answer
Please refer to response to Q.1 of Canada.
(4)  Sectoral Issues;  (para. 19)
Question
3. The Secretariat’s Report notes that insofar as barriers to commercial presence restrict
competition in the provision of services, they tend to impair efficiency in the sector, so that the prices
paid for these services, both by businesses and households, are higher than would be the case in a
more competitive market.  The resulting higher costs of doing business could hamper the
competitiveness of all firms in Malaysia that require essential services (such as energy, finance,telecommunications, and transportation) as inputs in their  production and delivery of goods and
services.  What is the Government of Malaysia doing to reduce these barriers to the provision of
services?WT/TPR/M/92/Add.1
Page 41
Answer
The liberalization of these services sector will be further undertaken in the context of the current
services negotiations.
I.  Economic Environment;  (1) Overview;  (para. 8)
Question
4. The Secretariat’s Report notes that the Government has taken steps or announced plans to
restructure the corporate and financial sectors.  What is the current status of the Government ofMalaysia’s restructuring efforts?
Answer
Same response as in Norway Q.1
(2)  Main Policy Developments;  (i)  Macroeconomic policies;  (ii)  structural policies;
(c)  Privatization;  (para. 26)
Question
5. The Secretariat’s Report notes that The Government has had a privatization program since
1983, although the onset of the Asian crisis has slowed its progress.  Indeed the Government has
bought back stakes in several companies, sometimes at prices considerably above those prevailing in
the market.  Thus, state-owned enterprises contin ue to play an important role in the Malaysian
economy, especially in the petroleum, electric ity, transportation, telecommunications, and postal
sectors.  What is the Government of Malaysia planning to do to speed up the privatization process?
Answer
Please refer to response to  Q.24 of Japan.
(4)  Outlook
Question
6. The Secretariat’s Report notes that there are several long-standing barriers to trade, and
particularly to foreign investment, that still constitute potentially important impediments to Malaysia's
sustained recovery from the crisis.  A more liberal trade and investment regime could also contribute
greatly not just to a sustained economic recove ry, but also to Malaysia's long-term economic
development.  What is Malaysia doing to address this?
Answer
Malaysia’s trade and investment regime is relatively liberal.  Malaysia is committed to providing a
conducive environment for trade and investment.  In this context, Malaysia would continuously
review its policies to this end.WT/TPR/M/92/Add.1
Page 42
II.  Trade Policies Regime:  Framework and Objectives;  (3)  Development and Administration
of Trade Policy;  (i)  Administrative framework;  (para. 11)
Question
7. The Secretariat’s Report notes that the Malaysian Industrial Development Authority (MIDA),
provides tax and non-tax incentives to "deserving infant industries".  Can you please provide further
details on what qualifies an industry as a "deserving infant industry"?  In addition, could you please
describe the tax and non-tax incentives that are provided to these industries?
Answer
The existing direct and indirect tax incentives offered are as follows:
- Pioneer Status (PS)
- Investment Tax Allowance (ITA)
- Reinvestment Incentive (RA)- Industrial Linkage Programme (ILP)
- Accelerated Capital Allowance (ACA)
- Infrastructure Allowance
- Industrial Building Allowance (IBA)
- High-tech incentives- Incentives for strategic projects
- Incentives for multimedia super corridor
- Export incentives
- Training incentives
- Research and development incentives
- Incentives for information technology
- Import duty and sales tax exemptions
These tax incentives are applicable to both fore ign and domestic investors, with the exception
of the PS for small-scale companies and ILP incentives.
(4)  Trade Policy Objectives;  (para. 16)
Question
8. The Secretariat’s Report notes that tax and non-tax incentives are being offered to companies
who contribute to the Government’s objectives.  What types of incentives are being offered?  Are only
specific companies or industries eligible for thes e incentives?  If so, what are those companies or
industries?
   How are these objectives defined, and what are they aimed at achieving?
Answer
Same response as in US Q.7
(5)  Trade Agreements and Arrangements;  (i)  Multilateral agreements;  WTO;  (para. 19)
Question
9. The S ecretariat’s Report notes that Malaysia is committed to phasing out its export subsidies
in the manufacturing sector over eight years in order to bring them in conformity with its WTOWT/TPR/M/92/Add.1
Page 43
agreements.  Please explain what measures have been  taken to date to  “phase out” export subsidies
in the manufacturing sector?
Answer
No new additional export incentive was introduced since 2000.  Currently, the Government is in the
process of reviewing the existing export incentives to be consistent with WTO rules.
III.  Trade Policies and Practices by Measures;  (2)    Measures Directly Affecting Imports;
(ii)  Tariffs;  (e)  Tariff levels;  (para. 24)
Question
10. The Secretariat’s Report notes that Malaysia has raised tariff rates on automobiles,
construction equipment, and certain appliances.  What was the basis for this decision?  Are the
increased rates within Malaysia's WTO bindings?  When does Malaysia intend to lower these rates?
Answer
The tariff increases were consistent with Malaysia’s obligation under the WTO.  Tariffs are constantly
reviewed and will be progressively liberalized when circumstances allow.
(iv)  Import prohibitions, restrictions and licensing;  (b)   Import approval and licensing;
(para. 43)
Question
11. The Secretariat’s Report notes that Malaysia maintains non-automatic licensing on
approximately 27.3 % of all tariff lines.  Licensing requirements for the importation of goods are
considered NTMs and, as such, must be justified in order to be maintained.  There is no WTO
justification for maintaining discretionary licensing to regulate the flow of imports to promote
strategic industries.  What is Malaysia’s doing to reduce and eliminate its extensive discretionary
licensing system?
Answer
See responses to EU Q.7 and Q.8
(vi)   Government Procurement;  (para. 50)
Question
12. The Secretariat’s Report notes that Malaysia is not a party to the WTO Agreement on
Government Procurement.  Forei gn firms consistently call for enhanced transparency in the
government's procurement decision-making process.  Short of signing on to the GPA, what measures
is the GOM considering to improve transparency in the procurement process?
Answer
Transparency is one of the principles in government procurement and it is highlighted in the relevant
procurement rules and regulations.  To further enhance transparency in the procurement process,electronic procurement is being implemented in stages.WT/TPR/M/92/Add.1
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Additionally, Treasury Circular letters are issued periodically to further clarify new policies and
procedures.  These circular letters can be accessed by the public through the Malaysia Treasury’shomepage at http//www.treasury.gov.my.
(viii)  Local-content requirements and the vendor program;  (para. 46)
Question
13. The Secretariat’s Report notes that both Industrial Linkage Programme (ILP) and the Vendor
Development Program promote domestic industry through financial, technical and other relatedassistance.  Please provide further details of the types and the extent of financial and other related
assistance these government agencies provide.
Answer
Details of these programmes provided by the Small and Medium Industries Development Corporation
are available at  http//www.smidec.gov.my.
(3)  Measures Directly Affecting Exports;  (iv)  Duty and tax concessions;  (c) Export Processing
Zones;  (para. 82)
Question
14. Are there any special employee benefits offered to companies which locate in free zones (such
as reduction in social security payments, reduction or financing of employee training etc...)?  If thereare benefits that are paid to the company for empl oyment or employee purposes, are those benefits the
same for both small-and medium sized companies as well as larger companies?
Answer
No special employee benefits are offered to companies in free zones.  There are also no differences in
benefits between small and big companies.
(vii)  Export promotion and marketing assistance;  (para. 90)
Question
15. The Secretariat’s Report notes that the Government provides assistance programs that
include tax incentives, financial assistance and institutional support for export marketing and
promotion activities.  Please describe what the tax incentives are?  Please describe what the financial
assistance consists of?
Answer
The full list of incentives can be obtained from the website of the Malaysian Industrial Development
Authority (MIDA) http//www.mida.gov.my.WT/TPR/M/92/Add.1
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(4)  Measures Affecting Production and Trade;  (ii) Taxation and tax measures;  (a) Direct
taxation;  (para. 97)
Question
16. The Secretariat’s Report notes that the Government of Malaysia has no direct export
subsidies; however, there are particular tax incentive programs that target sectors such as: Pioneer
Status, Investment Tax Allowance (ITA), Rein vestment Allowance (RA), and Accelerated Capital
Allowance (ACA).  Please explain what type of incentives are provided, what the eligibility criteria is,and whether these programs are limited to specific sectors (if so, which ones)?  Do you have plans to
"phase out" export incentive programs such as:  Double Deductions, Exemption for the Value of
Increased Exports, Industrial Building Allowance, and Exemption for Shipping Operations.  Could
you provide detailed information for each program listed above?
Answer
These incentives are provided to all sectors.  All incentive programmes are regularly reviewed for
their effectiveness and compliance with WTO.  The full list of incentives can be obtained from the
website of the Malaysian Industrial Developm ent Authority (MIDA) http//www.mida.gov.my.
(b)  Indirect taxation;  (para. 99)
Question
17. The Secretariat’s Report notes that "national cars" excise duties are half of what the normal
rates levied on cars that are either imported or domestically assembled.  Is this indirect taxation
under a certain program?  If so, can you explain this program in greater detail?  Are there any other
sectors this incentive program applies to?
Answer
Exemption of excise tax is given to any company which fulfils among others, the following
conditions:
- having integrated manufacturing facilities
- carrying out R&D activities
- providing extensive linkage to the local industry
- promoting Malaysian brand name
- having majority Malaysian equity
(vi)  Intellectual Property Rights;  (para. 119)
Question
18. The U.S. has recognized Malaysia's efforts with regard to stemming the piracy of optical
media, primarily through the passage and implementa tion of the Optical Disk Act this past year.
However, we continue to carefully scrutinize progress toward full implementation of the Act'sprovisions.  Can the Government of Malaysia provide an update on implementation?
Answer
The Optical Disc Act 2000 came into force effective 15 September 2001 and the manufacturers
involved in the business were given a 6 month period (till 15 March 2001) to comply with the licenceWT/TPR/M/92/Add.1
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requirements.  The Ministry adopts a strict policy of not entertaining any more applications following
that date.
The Act requires all manufacturers of optical discs to be licensed.  All manufacturers have to use the
SID (Source Identification Code) allocated by the Ministry.  The Act required the SID Code to be
marked on their machine moulds six months from the date the licences are issued.
The licence holders are also required to submit monthly reports on the following:
- Consumption of raw materials;
- Quantity of production;  and
- Names and Addresses of the copyright owners who had given their consent.
The Ministry continues to monitor the factories regu larly to ensure the manufacturers comply with the
provisions of the Act.
(vii)  Role of state-owned enterprises and privatization;  (para. 140)
Question
19. On what basis do NFPE’s provide financing to manufacturing companies?  What criteria
must be met to receive the funds from NFPE’s?  What is the criteria that the government uses to
purchase shares in private industries such as PETRONAS?
Answer
NFPEs do not provide financing to private companie s.  NFPEs, however, invest or take up equity
participation in companies.
IV.  Trade Policies by Sector;  (2) Agriculture;  (ii) Policy Objectives for the Sector;  (para. 7)
Question
20. The Secretariat’s Report notes that the National Agricultural Policy (NAP3) places emphasis
on "aim to further improve … Malaysia’s agriculture  sector".  Can you provide more information with
regards to this policy?  What type of measures are used to "Raise productivity and thereby improvesectors competitiveness"?  How does the policy intend to improve the agriculture sector?
Answer
Details on NAP3 can be accessed from the Ministry of Agriculture’s website at
http//www.agrolink.moa.gov.my.  Measures to improve productivity include:
- R&D, planting quality seeds, improve post-harvest handling.
- Training and upgrading of training institutions and improving modules of training.
- Encouraging small farmers to merge and operate along the lines of estatization.
- For small farmers only, developing food production parks so that infrastructure 
facilities can be shared by many more farmers thus optimising resources available.
- Developing guidelines for Good Agricult ural, Animal Husbandry and Aguaculture 
practices.
- Crop, animal and Aguaculture Health Protection (SPS issues).
- Mechanisation and modernization of farming methods.WT/TPR/M/92/Add.1
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(4)  Manufacturing;  (iii)  Main policy  instruments for the sector;  (para. 21)
Question
21. The U.S. applauds Malaysia’s decision in January 2001 to extend for three years the
investment incentive providing for 100 percent foreign equity in manufacturing concerns.  Is the GOM
considering new, pro-investment measures?
Answer
Same response as in Q.6
(iv)  Key subsectors;  (a)  Automobiles and their parts;  (para 24)
Question
22. Does Malaysia recognize that potentially large growth in the ASEAN sector is currently
hampered by GOM's restrictive import policies?  Members agreed this year to an extension of certain
local content requirements under TRIMS.  What steps will Malaysia take to address high tariffs andexcise taxes on autos, parts and motorcycles to encourage investment in the sector?
Answer
Malaysia is currently reviewing its automotive policy with a view to inject gradual competition into
the industry.  The review among others includes tariff.
Malaysia recently reduced import duty on motorcycles ranging from 80-120% to 60%.
(5)  Services;  (iii) Financial services;  (b) Banking;  (para. 48)
Question
23. Granting operating rights to foreign banks in Malaysia would increase the pool of capital
available to domestic investors, boosting the economy's chances for a rapid recovery from the current
downturn.  Will the GOM consider opening the banking sector and grant licenses to foreign banks
before the indicated liberalization of the sector in 2007?
Answer
At present, there is a very high foreign presence in the Malaysian banking sector.  14 out of
27 commercial banks in Malaysia are fully foreign-owned, controlling about 25% of the market. In
addition, foreigners also hold equities in the domestic-controlled commercial banks.
Liberalization of the banking sector will be undertaken progressively, taking into account the needs of
the economy and ensuring that liberalization will not lead to financial instability.  The pre-requisitesfor granting of new banking licences have been clearly stated in the Financial Sector Masterplan
(FSMP).  Once the domestic banking institutions have built greater capacity and capability to
compete, greater liberalization measures will be introduced progressively.  New foreign competition
may be introduced in Phase III if certain safeguards are met. In the meantime, foreigners are welcome
to participate in the domestic banks through strategic alliance and joint-venture, subject to the foreignequity limit of 30%.WT/TPR/M/92/Add.1
Page 48
INDIA
Question
1. In para. 22 of the Overview, the Secretariat Report has indicated that "the recent sharp
slowdown in the US economy and Japan’s further weakening, pose major challenges for Malaysia’s
trade and investment outlook and thus to Malaysia’s short and medium-term prospects".  In its view,
this raises a question "whether Malaysia’s economic policy has perhaps over-emphasised exports at
the expense of domestic demand (i.e. national saving is excessive), making it too dependent on foreignmarkets (and a narrow range of products, namely electronics)".
We would request the delegation of Malaysia to  comment on these Secretariat observations.  We
would also be interested to know of the details of  any strategy being formulated to deal with the
impact of the US economic slow down and downturn in the global economy in general.
Answer
As an open economy with trade accounting for more than 200% of GDP, the Malaysian economy has
been affected by the growing difficulties in the external sector, particularly the worsening economic
situation in the US, Japan and Euro region.  The manufacturing sector is more broad-based  and
Malaysia does not depend solely on electronics to drive growth.  In the recent Budget 2002, steps will
be taken to further enhance the agriculture sector as the third source of growth.  In addition, theeconomy will increasingly progress towards knowledge-based activities (ICT, Biotechnology,
Banking, Insurance, etc.) as the new sources of growth.   Therefore, emphasis will be made to
generate domestic demand-led activities.
To counter the effects of the global economic slow down, the following strategies are being adopted:
(i) strengthening Malaysia’s economic growth through increased domestic expenditure,
enhancing the role of the private sector and increasing competitiveness, and
(ii) diversifying sources of growth through trade and domestic industrial activities without
reducing the role of FDI as well as ensuing the combined expansion of Malaysia’s exports.
Question
2. Para. 6 of the Overview informs the Members of the setting up of a National Economic Action
Council (NEAC) in January 1998 as a consultative body to the Malaysian Cabinet.
We would like to know the composition of th e body as well as its terms of reference.
Answer
Please refer to NEAC website for details <www.neac.gov.my>
Question
3. As both the Secretariat and Government Reports note, the Malaysian Government has been
able to successfully recover from the Asian financial crisis of 1998 in a remarkably short period oftime and the Malaysian economy is on the path to  greater prosperity.  We would request the
delegation of Malaysia to share with us their experience from the crisis and their long-term plan in
meeting such crisis situations in the future.WT/TPR/M/92/Add.1
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Answer
Malaysia recovered from the Asian financial crisis to register two years of strong growth in 1999 and
2000.  Malaysia has been able to recover from the crisis in a remarkably short period of time by
adopting economic recovery strategies summarized below:
- relaxation of the tight fiscal policy and provide fiscal stimulus
- easing monetary policy
- undertaking the financial and corporate sector restructuring- introducing selective exchange control measures to restore stability in the financial
markets
- pegging the ringgit exchange rate to the US dollar
These strategies have been proven to be effective.
Malaysia will constantly monitor and assess developments in the external sector and their impact on
the economy.  Further measures  premised on prom oting growth through stre ngthening resilience and
enhancing competitiveness will be put in place to contain and minimise any adverse spillover effects
on the economy.
KOREA
III.  Trade Policies and Practices By Measure;  (3)  Measures Directly Affecting Exports;
(iii) Export prohibitions, restrictions, and licensing
Question
1. As para. 78 (p. 48) of the Secretariat’s Report points out, in 2001, export licensing
requirements were pervasive in the cases of forestry products, animals and animal products, etc.
Please explain why the export licensing is required for these products, in particular forestry products
export.
Answer
Export licensing for forestry products is required for data collection and for monitoring purposes,
given the sensitivity of forest in environment protection and sustainable forest management.  In the
case of animal and animal products export licensing is required for data collection, monitoring and
trace-back purposes related to SPS requirements.
IV.  Trade Policies By Sector;  (5) Services;  (iv)  Telecommunications
Question
2. As para. 65 (p. 87) of the Secretariat’s Re port points out, as of June 1, 2001, foreign
ownership equity in telecommunications companies ranged from 21% to 52%.  In the meantime, as
para. 76 (p. 90) points out, Malaysia’s commitments guarantee market access and national treatmentfor specific basic telecommunications services involving up to 30% equity of existing public
telecommunications operators.  Please explain to us the development of voluntary liberalization in
Malaysia’s telecommunications sector since the entrance into effect of the Basic Telecommunications
Agreement.WT/TPR/M/92/Add.1
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Answer
Please refer to response to Q.3 of Hong Kong, China.
Question
3. As footnote No. 73 in para. 65 (p. 87) of the Secretariat’s Report points out, the degree of
foreign equity participation in Telecom Malaysia is difficult to ascertain since the shares are floated.
Please present to us the degree of foreign equity participation as of any recent specific date.
Answer
It is estimated that about 15% - 20% of interest in Telekom Malaysia Berhad is held by foreigners.
Question
4. As para. 67 (p. 88) of the Secretariat’ s Report points out, a new Communication and
Multimedia Commission (CMC) was established with the objective of emphasizing the convergence of
telecommunications, broadcasting, and information technology.  Please let us know who is in chargeof appointing the chairman of the CMC, and how the appropriation for the CMC is provided.  In
addition, please let us know whether the gover nment owns equity for any telecommunications
operator equities, and also please present the degree of government equity participation.
Answer
The Minister of Energy, Communications and Multimedia appoints the Chairman of the Commission.
Apart from the initial launching grant provided by the government, the Commission obtains its funds
through licensing fees.
The Government holds about 67% of the total equity of Telekom Malaysia Berhad.
Question
5. Concerning para. 71 (pp. 89-90) of the Secret ariat’s Report, please explain how the Company
Act 1965 defines a foreign company which is excluded from individual and/or class licence grants.
Answer
The term "foreign company" is defined under the Companies Act 1965 as a company, corporation,
society, association or other body incorporated outside Malaysia.
It also includes an unincorporated society, association or other body which under the law of its place
of origin may sue or be sued or hold property in the name of the secretary or other officer of the body
or association duly appointed for that purpose and which does not have its head office or principalplace of business in Malaysia.
Question
6. Malaysia requires import licence for steel products.  Please explain to us whether Malaysian
Government has any plan to let this import licence for steel products applied to more transparently?WT/TPR/M/92/Add.1
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Answer
The application process of import licences for steel products in Malaysia is transparent and all
importers have been notified of the requirements.
7. Malaysia’s tariff rate to vehicles is very high as much as 140% to 300%.  Does Malaysian
Government have any plan to reduce the rate in the near future?
Answer
Malaysia is currently reviewing its automotive policy with a view to inject gradual competition into
the industry.  The review among others includes tariff structure.
Question
8. Malaysia limits the number of alien workers to be employed when it permits FDI in the
manufacturing sector.  Does Malaysian Government have any plan to increase the number of alien
workers to be employed by a manufacturing company?
Answer
Applications for alien workers will be considered on a case by case basis.
Additional Questions from Korea
III.  Trade Policies and Practices by Measure;  (3)  Measures Directly Affecting Exports;
(viii) Competition policy and regulatory issues
Question
1. As para. 145 (p. 66) of the Secretariat’s Report points out, Malaysia does not have any
comprehensive competition law.  Does Malaysia believe the current regulatory acts can work as
adequate substitute for comprehensive competition law?  Does Malaysia have any plan for
establishing a comprehensive competition law and authority?
Answer
Malaysia has several regulatory acts in place to govern that addresses anti-competitive issues.  To
improve on this, a competition law is also being considered.
Question
Para. 146 (p. 66) of the Secretariat’s Report indicates that Malaysia will consider the possibility of
entering into bilateral agreements on competition policy actions, depending on the merits of each
case.  Is it possible to enter into and implement bi lateral agreements with other countries without
competition law or authority?
Answer
The statement is inaccurate.  At the moment, Malaysia has not considered this possibility.WT/TPR/M/92/Add.1
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Question
As para. 146 (p. 66) of the Secretariat’s Report points out, price controls are used in Malaysia on a
number of products.  In many cases, price cont rol can have anti-competitive effects.  Regulatory
reform against anti-competitive regulations is one of  the core elements in competition policy.  Please
explain to us whether the Malaysian government has  any plans to change or reform price control
schemes to build a more competition-friendly business environment.
Answer
In Malaysia, price controls have worked well in maintaining the inflation rates at below 5%.  Price
controls are also administered only for essential items and have so far not given rise to anti-
competitive effects.  The Price Control Act 1946 is under review and will incorporate elements of
transparency, industry/market participation and the Government’s involvement is expected to be
minimal.
__________