WT/TPR/S/366/Rev.1  
25 May 2018  
(18-3141) Page: 1/137 
Trade Policy Review Body   
 
TRADE POLICY REVIEW  
REPORT BY THE SECRET ARIAT  
MALAYSIA  
Revision  
This report, prepared for the seventh Trade Policy Review of Malaysia, has been drawn up by the 
WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement 
establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement 
Establishing the World Trade Organization), sought clarification from Malaysia on its trade policies 
and practices.  
 
Any technical questions arising from this report may be addressed to John Finn 
(tel: 022 739 5081); Usman Ali Khilji (tel: 022 739 6936) ; and Zheng Wang (tel: 022 739 5288) . 
 
Document WT/TPR/ G/366 contains the policy statement submitted by Ma laysia.  
 
 
Note: This report was drafted in English.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  CONTENTS  
SUMMARY  ................................ ................................ ................................ ........................  8 
Economic Environment  ................................ ................................ ................................ ........  8 
Trade Policy Framework  ................................ ................................ ................................ ....... 8 
Trade Policy Developments  ................................ ................................ ................................ .. 9 
Sectoral Policy Developments  ................................ ................................ .............................. 10 
1   ECONOMIC ENVIRONMENT  ................................ ................................ ........................  12 
1.1   Main Features of the Economy  ................................ ................................ ..................... 12 
1.2   Recent Economic Developments  ................................ ................................ ................... 13 
1.2.1    Balance of payments  ................................ ................................ ................................ 16 
1.3   Developments in Trade and Investment  ................................ ................................ ........ 18 
1.3.1    Trends and patterns in merchandise and services trade  ................................ ................ 18 
1.3.1.1    Composition of merchandise trade  ................................ ................................ .......... 19 
1.3.1.2    Direction of merchandise trade  ................................ ................................ ............... 20 
1.3.2    Trends and patterns in FDI  ................................ ................................ ....................... 21 
2   TRADE AND INVESTMENT  REGIMES ................................ ................................ ...........  23 
2.1   General Framework  ................................ ................................ ................................ ....23 
2.2   Trade Policy Formulation and Objectives  ................................ ................................ ........ 23 
2.2.1    Structure of Trade Policy Formulation  ................................ ................................ ......... 23 
2.2.2    Trade policy objectives  ................................ ................................ ............................. 25 
2.2.3    Trade laws and regulations  ................................ ................................ ....................... 26 
2.3   Trade Agreements and Arrangements  ................................ ................................ ........... 26 
2.3.1    WTO ................................ ................................ ................................ ...................... 26 
2.3.2    Regional and preferential agreements  ................................ ................................ ........ 29 
2.3.2.1    ASEAN  ................................ ................................ ................................ ................. 29 
2.3.2.2    New RTAs  ................................ ................................ ................................ ............ 30 
2.3.3    PTAs ................................ ................................ ................................ ...................... 33 
2.3.4    Other agreements and arrangements  ................................ ................................ ......... 33 
2.4   Investment Regime  ................................ ................................ ................................ ....33 
2.4.1    Overview  ................................ ................................ ................................ ................ 33 
2.4.2    Foreign investment regime  ................................ ................................ ....................... 36 
3   TRADE POLICIES AND P RACTICES BY MEASURE  ................................ ........................  38 
3.1   Measures Directly Affecting Imports  ................................ ................................ .............. 38 
3.1.1    Customs procedures, valuation, and requirements  ................................ ....................... 38 
3.1.2    Rules of origin  ................................ ................................ ................................ ......... 39 
3.1.3    Tariffs  ................................ ................................ ................................ .................... 40 
3.1.3.1    Applied MFN tariff  ................................ ................................ ................................ .40 
3.1.3.2    Duty concessions/exemptions  ................................ ................................ ................. 43 
3.1.3.3    Tariff preferences  ................................ ................................ ................................ ..43 
3.1.4    Other charges affecting imports  ................................ ................................ ................. 44 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.1.5    Import prohibitions, restrictions, and licensing  ................................ ............................ 44 
3.1.5.1    Prohibitions (first schedule)  ................................ ................................ .................... 45 
3.1.5.2    Import licensing (second, third, and fourth sche dules)  ................................ ............... 45 
3.1.5.2.1    Second schedule  ................................ ................................ ................................ 45 
3.1.5.2.2    Third schedule  ................................ ................................ ................................ ...46 
3.1.5.2.3    Fourth schedule  ................................ ................................ ................................ .47 
3.1.6    Anti-dumping, countervailing, and safeguard measures  ................................ ................ 49 
3.2   Measures Directly Affecting Exports  ................................ ................................ .............. 51 
3.2.1    Customs procedures and requirements  ................................ ................................ .......51 
3.2.2    Taxes, charges, and levies  ................................ ................................ ........................ 52 
3.2.3    Export prohibitions, restrictions, and licensing  ................................ ............................. 52 
3.2.3.1    Export prohibitions (first schedule)  ................................ ................................ .......... 53 
3.2.3.2    Export licensing (second and third schedules)  ................................ ........................... 53 
3.2.4    Export support and promotion  ................................ ................................ ................... 54 
3.2.4.1    Export support  ................................ ................................ ................................ ......54 
3.2.4.2   Tariff and tax concessions  ................................ ................................ ...................... 55 
3.2.4.3    Free trade zones and other measures  ................................ ................................ ......55 
3.2.4.4    Export promotion  ................................ ................................ ................................ ..55 
3.2.5    Export finance, insurance, and guarantees  ................................ ................................ ..56 
3.3   Measures Affecting Production and Trade  ................................ ................................ .......57 
3.3.1    Taxation and incentives  ................................ ................................ ............................ 57 
3.3.1.1    Tax structure  ................................ ................................ ................................ ........ 57 
3.3.1.1.1    Indirect taxes  ................................ ................................ ................................ ....57 
3.3.1.1.2    Direct taxes  ................................ ................................ ................................ .......58 
3.3.1.2    Tax incentives  ................................ ................................ ................................ ......59 
3.3.1.2.1    Main incentives  ................................ ................................ ................................ ..59 
3.3.1.2.2    More favourable incentives  ................................ ................................ .................. 60 
3.3.1.2.3    Incentives on indirect taxes  ................................ ................................ ................. 61 
3.3.1.3    Other support measures, and SMEs  ................................ ................................ ......... 61 
3.3.2    Standards and other technical requirements  ................................ ............................... 62 
3.3.3    Sanitary and phytosanitary requirements  ................................ ................................ ....64 
3.3.4    Competition policy and price controls  ................................ ................................ ......... 65 
3.3.4.1    Competition policy  ................................ ................................ ................................ 65 
3.3.4.1.1    Legal framework  ................................ ................................ ................................ 65 
3.3.4.1.2    Institutional framework and enforcement  ................................ .............................. 66 
3.3.4.1.3    International cooperation  ................................ ................................ .................... 67 
3.3.4.2    Price and supply controls  ................................ ................................ ....................... 68 
3.3.5    State trading, government -linked enterprises, and privatization  ................................ ....68 
3.3.5.1    State trading  ................................ ................................ ................................ ........ 68 
3.3.5.2    Government -linked companies (GLCs)  ................................ ................................ .....68 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.3.5.3    Privatization  ................................ ................................ ................................ ......... 69 
3.3.6    Government procurement  ................................ ................................ ......................... 70 
3.3.6.1    Overview  ................................ ................................ ................................ ............. 70 
3.3.6.2    The lega l framework and government procurement system  ................................ ........ 70 
3.3.6.3    Procurement methods and the use of e -procurement  ................................ ................. 72 
3.3.6.4    Integrity and bid challenges review mechanism  ................................ ........................ 73 
3.3.7    Intellectual property rights  ................................ ................................ ........................ 74 
3.3.7.1    Overview  ................................ ................................ ................................ ............. 74 
3.3.7.2    Enforcement  ................................ ................................ ................................ ......... 77 
4   TRADE POLICIES BY SE CTOR  ................................ ................................ .....................  79 
4.1   Agriculture, Forestry, and Fisheries  ................................ ................................ ............... 79 
4.1.1    Agriculture  ................................ ................................ ................................ .............. 79 
4.1.1.1    Features  ................................ ................................ ................................ .............. 79 
4.1.1.2    Agriculture trade  ................................ ................................ ................................ ...80 
4.1.1.3    Domestic policies  ................................ ................................ ................................ ..81 
4.1.1.3.1    Selected sub -sectors  ................................ ................................ .......................... 83 
4.1.1.4    Trade policy  ................................ ................................ ................................ ......... 89 
4.1.1.5    Support levels  ................................ ................................ ................................ ......90 
4.1.2    Fisheries  ................................ ................................ ................................ ................. 92 
4.1.2.1    Features  ................................ ................................ ................................ .............. 92 
4.1.2.2    Trade  ................................ ................................ ................................ .................. 93 
4.1.2.3    Policy  ................................ ................................ ................................ .................. 94 
4.2   Mining and Energy  ................................ ................................ ................................ ......97 
4.2.1   Mining and quarrying  ................................ ................................ ............................... 97 
4.2.2    Energy  ................................ ................................ ................................ ................... 99 
4.2.2.1    Petroleum and gas  ................................ ................................ ..............................  100 
4.2.2.2    Electricity  ................................ ................................ ................................ ...........  105 
4.3   Services  ................................ ................................ ................................ ..................  106 
4.3.1    General ................................ ................................ ................................ ................  106 
4.3.2    Financial services  ................................ ................................ ................................ ... 108 
4.3.3    Telecommunications  ................................ ................................ ...............................  118 
4.3.4    Transport  ................................ ................................ ................................ ..............  122 
4.3.4.1    Air transport  ................................ ................................ ................................ ....... 122 
4.3.4.2    Maritime transport  ................................ ................................ ..............................  124 
4.3.5    Tourism  ................................ ................................ ................................ ................  129 
5   APPENDIX TABLES  ................................ ................................ ................................ .. 132  
 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  CHARTS  
 
Chart 1.1 Product composition of merchandise trade, 2013 and 2016  ................................ .......19 
Chart 1.2 Direction of merchandise trade, 2013 and 2016  ................................ ....................... 21 
Chart 1.3 Foreign direct investment, 2000 -16 ................................ ................................ ........ 22 
Chart 3.1 Average applied MFN tariff rates, by HS section, 2013 and 2017  ................................ 41 
Chart 3.2 Distribution of MNF tariff r ates, 2013 and 2017  ................................ ....................... 42 
Chart 3.3 Tariff distribution by type of duty, 2017  ................................ ................................ ..42 
Chart 4.1 Contribution to GDP from agriculture, rubber, forestry, and fishing , 2010 -16 .............. 79 
Chart 4.2 Domestic support in Malaysia, 2004 -16 ................................ ................................ ..91 
Chart 4.3 Exports and imports of petroleum and petroleum productions, and natural gas, 
2013-16 ................................ ................................ ................................ .........................  102 
Chart 4.4 PETRONAS' contribution to government and state revenues, 2012 -16 ......................  103 
Chart 4.5 KLCI and market capitalization, 2013 -17 ................................ ..............................  116 
 
TABLES  
 
Table 1.1 Selected macroeconomic indicators, 2013 -16 ................................ .......................... 12 
Table 1.2 Basic economic and social indicators, 2013 -16 ................................ ......................... 13 
Table 1.3 Balance of payments, 2013 -16 ................................ ................................ .............. 17 
Table 1.4 Trade in services, 2013 -16 ................................ ................................ .................... 18 
Table 2.1 Sectoral plans, and trade and investment tools  ................................ ........................ 25 
Table 2.2 WTO notifications, 1 November 2013 to 10 November 2017  ................................ ......27 
Table 2.3 Main features of new RTAs, 2014 -17 ................................ ................................ ......31 
Table 2.4 ASEAN – India: Malaysia's tariff elimination and reduction commitments  .................... 32 
Table 3.1 Import time and cost, 2017  ................................ ................................ ................... 38 
Table 3.2 Malaysia's tariff structure, 2013 and 2017  ................................ ............................... 40 
Table 3.3 Summary analysis of Malaysia's preferential tariffs, 2017  ................................ .......... 43 
Table 3.4 Import prohibition and licensing schedules  ................................ .............................. 44 
Table 3.5 Import licensing  ................................ ................................ ................................ ...45 
Table 3.6 Imports subject to TBT requirements  ................................ ................................ ......47 
Table 3.7 Anti -dumping investigations and measures imposed, 2014 -17 ................................ ...49 
Table 3.8 Definitive anti -dumping measures in force, by country and product, 2014 -
30 June 17 ................................ ................................ ................................ ........................ 49 
Table 3.9 Initiation of safeguard investigations, provisional measures, final measures, and 
termination 2014 -17 ................................ ................................ ................................ .......... 50 
Table 3.10 Export time and cost, 2017  ................................ ................................ ................. 52 
Table 3.11 Malaysia export duties, 2017  ................................ ................................ ............... 52 
Table 3.12 Export prohibition and licensing schedules  ................................ ............................. 53 
Table 3.13 Export licensing  ................................ ................................ ................................ .53 
Table 3.14 Structure of direct and indirect tax revenue, 2013 -16 ................................ ............. 57 
Table 3.15 Tax incentives ................................ ................................ ................................ ....59 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 3.16 More favourable tax incentives - manufacturing  ................................ ..................... 60 
Table 3.17 Accreditation  ................................ ................................ ................................ .....64 
Table 3.18 Number of complaints, investigations and findings, 2014 -16 ................................ ....67 
Table 3.19 Government procurement value by public sector, 2014 -16 ................................ ......70 
Table 3.20 WIPO -administered treaties  ................................ ................................ ................. 75 
Table 3.21 IPR data  ................................ ................................ ................................ ............ 77 
Table 4.1 Exports and imports of agricultural products and rubber, 2013 -16 ............................. 80 
Table 4.2 Agrobank financing for agriculture, 2013 -16 ................................ ............................ 82 
Table 4.3 Self -sufficiency forecasts in NAP 2010-2020 and actual levels  ................................ ....82 
Table 4.4 Oil palm, selected  indicators, 2010 -16 ................................ ................................ ....83 
Table 4.5 Export duty rate (after partial duty exemption)  ................................ ........................ 84 
Table 4.6 Rubber, selected indicators, 2010 -16 ................................ ................................ .....85 
Table 4.7 Rubber production incentive, 2015, 2016 and 2017  ................................ .................. 86 
Table 4.8 Livestock indicators, 2008 -15 ................................ ................................ ................ 87 
Table 4.9 Rice, selected indicators, 2008 -15 ................................ ................................ .......... 88 
Table 4.10 Incentives for rice production 2009, 2014, and 2016  ................................ .............. 89 
Table 4.11 Budget outlay for agriculture, 2017  ................................ ................................ ......90 
Table 4.12 Financing scheme funds operated by Agrobank, 2013 -16 ................................ ........ 91 
Table 4.13 Selected indicators, 2010 -16 ................................ ................................ ............... 92 
Table 4.14 Marine and inland capture fishing and aquaculture, 2007 -15 ................................ ...92 
Table 4.15 Malaysia's fishing fleet, 2015  ................................ ................................ ............... 93 
Table 4.16 Exports and imports of fish and fish products, 2013 -16 ................................ ........... 93 
Table 4.17 Fishing zones in Malaysia  ................................ ................................ .................... 95 
Table 4.18 Government spending on fisheries, 2011 -16 ................................ .......................... 96 
Table 4.19 Mining and quarrying production, 2010 -16 ................................ ............................ 97 
Table 4.20 Imports and exports of non -petroleum minerals, 2013 -16 ................................ .......97 
Table 4.21 Mineral licences issued, 2013-16 ................................ ................................ .......... 99 
Table 4.22 Primary energy supply and consumption, 2010 -16 ................................ ................. 99 
Table 4.23 Oil and gas production and use, 2010 -16 ................................ ............................  101 
Table 4.24 Electricity generation mix, 2010 -16 ................................ ................................ .... 105 
Table 4.25 Regulated prices for natural gas in Malaysia, January 2014 -June 2017  ....................  106 
Table 4.26 Services contri bution to GDP, 2010 -16 ................................ ................................  107 
Table 4.27 Financial sector indicators, 2013 -16 ................................ ................................ ... 108 
Table 4.28 Islamic banking system, 2013 -16 ................................ ................................ ....... 111 
Table 4.29 Takaful sector, 2013 -16 ................................ ................................ ....................  114 
Table 4.30 Mobile service providers, 2016  ................................ ................................ ...........  118 
Table 4.31 Selected telecommunication indicators, 2012 -16 ................................ ..................  119 
Table 4.32 Telecommunications licensing regime, 2017  ................................ ........................  120 
Table 4.33 Telecommunications licences iss ued, 2012 -16................................ ......................  121 
Table 4.34 Functions of the Department of Civil Aviation and the Malaysian Aviation 
Commission  ................................ ................................ ................................ ....................  122 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 4.35 Air transport, selected indicators, 2011 -16 ................................ ..........................  123 
Table 4.36 Total vessels registered in the Malaysian Ship Registry by type, 2011 -16 ................  125 
Table 4.37 Total vessels registered in the Malaysian International Ship Registry by type, 
2011-16 ................................ ................................ ................................ .........................  126 
Table 4.38 Main ports and activities, 2011 -16 ................................ ................................ ...... 128 
Table 4.39  Tourism indicators, 2012 to 2016  ................................ ................................ ....... 129 
Table 4.40 Foreign equity limits for tourism  ................................ ................................ .........  130 
Table 4.41 Fiscal incentives for hotels and tourism projects, 2017  ................................ ..........  130 
 
BOXES  
 
Box 4.1 Islamic banking and finance  ................................ ................................ ..................  110 
 
APPENDIX TABLES  
 
Table A1. 1 Merchandise exports by group of products, 2013 -16 ................................ ............  132 
Table A1. 2 Merchandise imports by group of products, 2013 -16 ................................ ...........  133 
Table A1. 3 Merchandise exports by destination, 2013 -16 ................................ .....................  134 
Table A1. 4 Merchandise imports by o rigin, 2013 -16 ................................ ............................  135 
 
Table A3. 1 Summary analysis of Malaysia's MFN tariff, 2013 and 2017  ................................ .. 136 
 
 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  SUMMARY  
Economic Environment  
1. Malaysia is a middle -income country with a diverse economy. Trade is very important, with 
exports and imports of goods and s ervices equivalent to about 130% of GDP. For the past four 
years , real GDP growth has averaged nearly 5% despite a number of external and domestic 
shocks, including global commodity price and financial market volatility, weak external demand, 
and domestic political controversy. Growth has been  based on domestic demand and helped by the 
diversified production and export base, a flexible exchange rate, responsive macroeconomic 
policies, and strong financial markets.  
2. From 2013 to 2016, there were some changes to the structure of trade in goods. In US 
dollar terms, exports and imports declined, mainly due to lower commodity prices. On the export 
side, the value of exports of fuels and palm oil declined while exports of office machines and 
telecommunications equi pment increased. Other Asian countries, and other ASEAN members in 
particular, are the main source of imports and destination for exports.  
3. Long-term economic policy is set out in Vision 2020 which includes the objective of 
achieving high -income country st atus by 2020, by, inter alia , sharply accelerating the growth of 
labour productivity. In addition, the Eleventh  Malaysia Plan and sectoral plans, such as the 
National Agrofood Policy 2011 -20 and the National Commodity Policy 2011 -20, emphasize the 
importan ce of productivity, innovation, and trade in achieving economic growth.  
Trade Policy Framework  
4. There have been no major changes to the institutions responsible for trade policy 
formulation since 2014. Among the new trade and investment -related laws that en tered into force 
during the review period were:  the Companies Act, which introduced provisions to simplify the 
procedures to start a company, to reduce the cost of doing business, as well as to reform 
corporate insolvency mechanisms; the introduction of the goods and services tax to replace the 
sales tax; the Malaysian Aviation Commission Act, pursuant to which the Malaysian Aviation 
Commission was established; and various amendments to the Food Regulations . 
5. As an active Member of the WTO, Malaysia has su bmitted notifications to the WTO in a 
number of areas . However, at end -October 2017 , several notifications were outstanding , including 
on: agriculture (domestic support); quantitative restrictions; and customs valuation . During the 
review period, Malaysia was not involved in any new WTO dispute settlement cases either as 
complainant or respondent. It participated as a third party in four cases.  
6. As a member of ASEAN, Malaysia is a party to trade agreements with Australia and New 
Zealand;  China;  India;  Japan;  and the Republic of Korea . During the review period, the  
ASEAN -India Agreement was expanded to cover trade in services. Malaysia also has bilateral RTAs 
with: Australia;  Chile;  India;  Japan; New Zealand;  Pakistan;  and Turkey. The Malaysia -Turkey FTA  
(MTFTA) entered into force in 2015. On 31 December 2015, the first phase of the ASEAN Economic 
Community (AEC) Blueprint 2015 was completed  and ASEAN leaders then adopted the AEC 
Blueprint 2025.  
7. Restrictions on foreign investment remain in fisheries, ener gy, telecommunications, finance, 
and transport services, and foreign participation in public -private -partnership projects is limited to 
a ceiling of 25% of share capital. Some policies supporting the ethnic Malay community 
(bumiputera ), including minimum e quity participation in some sectors, may affect FDI. However, 
the Government has continued to relax foreign investment restrictions. Currently there is no 
foreign equity restriction in the capital market except for a 70% cap on investment banks.   
8. The Gover nment has been making efforts to modernize Malaysia's business licensing 
system, by reviewing licences and making them accessible online. The Malaysia Productivity 
Corporation (MPC) conducted sectoral regulatory reviews to reduce unnecessary regulatory 
burdens on business.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Trade Policy Developments  
9. There has been no major change to customs procedures during the review period. Malaysia 
ratified the WTO Trade Facilitation Agreement (TFA) in May 2015, and notified that it designated 
all provisions under Category A with some exceptions. Malaysia's ease o f trading across borders  
remains highly ranked in international comparisons.  
10. The tariff is the main trade policy instrument, despite its low share in total tax revenue 
(1.7%). Due to changes in nomenclature (HS12 to HS17) and for other technical reasons, t he 
average applied MFN tariff increased from 5.6% in 2013 to 7.5% in 2017, although tariffs 
increased on only a single tariff line (at 10 -digit level).  Almost all rates (99% of tariff lines) are 
ad valorem,  while duty -free lines accounted for 56.2% of all tariff lines. The number of different 
tariff rates increased from 19 in 2013 to 25 in 2017. Ad valorem  tariff rates range from zero to  
60% for industrial products and zero to 90% for agricultural products. Among different product 
groups, average tariffs ar e highest for transport equipment (the simple average tariff rate was 
21.5% in 2017).  These averages do not include the 1% of lines subject to non -ad valorem  tariffs 
which are mostly applied to tobacco and alcohol products, with ad valorem  equivalents that  range 
from 0.2% to 465% for certain manufactured tobacco. Simple average rates under all preferential 
arrangements are lower than the simple average MFN rate, although the averages among 
arrangements are different, ranging from 0.1% to 7.4%.  
11. Malaysia app lies nine tariff quotas affecting 27 tariff lines at the HS 10 -digit level. According 
to the authorities, this is to meet the requests of domestic small producers. Import duty 
exemptions are applied  to local and for eign manufacturing companies  on raw mater ials and 
components used in the manufacture of goods for export, and for machinery and equipment not 
available in Malaysia but used directly in the manufacturing process.  In addition, i mports of 16 
product categories required import licence s. 
12. During the re view period, the number of antidumping investigation initiations reached its 
peak in 2015, and the number of definitive anti -dumping measures reached its peak in 2016. 
Imports from nine Members were affected, and antidumping duties were applied mostly on 
biaxially oriented polypropylene film, and steel wire rod. Between 2014 and 2017, four safeguard 
investigations were initiated, all concerning steel products.  
13. Export duties range from 5% -30% and apply to 217 tariff lines (mainly crude oil, palm oil, 
and wo od) in 2017. The number of tariff lines with export duties declined from 482 in 2014, partly 
reflecting the merging of tariff lines during the transposition exercise.  
14. A significant change to Malaysia's tax structure was the replacement of the sales tax wi th a 
6% goods and services tax (GST) (from 1 April 2015), which is essentially a value added tax -type 
system. In 2016, revenue from GST accounted for 24% of total tax revenue. The share of 
petroleum income tax to total tax revenue declined, from 19% in 201 3 to 5% in 2016, reflecting 
falling oil prices.  
15. Malaysian incorporated companies, local or foreign, are eligible for incentives. Tax incentives 
continued to be implemented mainly through the pioneer status and the investment tax allowance 
schemes.  Direct t ax incentives grant partial or total relief from income tax for a specified period, 
and incentives on indirect taxes are in the form of exemptions from import tariffs and excise 
duties.  In addition, Malaysia provides  support in the form of a statutory inco me tax exemption to 
manufacturers  based on the value of increased exports . Exemption of statutory income tax 
equivalent to 50% of the value of increased export is available to companies in selected services 
sectors.  
16. Regarding standards, Standards Malaysia , Malaysia's national standardization and 
accreditation body, is focusing on establishing standards that have a high impact on the public, 
including industries, rather than on the number of standards. As a result, the number of Malaysian 
standards dropped from 6,381 in 2012 to 5,284 in 2017. Malaysia continues to align its standards 
with international ones: in 2017, 60% of Malaysian standards were aligned with international 
standards, up slightly from 59.8% in 2014, and 54% were identical, down from 57.5% i n 2014. In 
2017, 510 or 9.7% (6.5% at end -2012) of all Malaysian standards were compulsory.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  17. State involvement in the economy is considerable, with government -linked investment 
companies  involved in petroleum, electricity, telecommunications, postal servic es, air  transport , 
public transport,  and financial services . Malaysia notified the WTO that Padiberas Nasional Berhad 
(BERNAS) acts as a state trading enterprise for rice importation. General purpose flour, cooking 
oil, and liquefied petroleum gas (LPG) are subject to price controls and subsidies are provided to 
support ceiling prices.   
18. There have been no major changes to the legal and institutional framework governing 
competition polic y since the previous review. The government procurement regime remains a 
decentralized system, and continues to be used to favour locally owned businesses. Foreign 
suppliers are not allowed to participate in domestic tenders, while i nternational tenders are invited 
only if there are no domestica lly produced supplies or services available.  Malaysia is an observer to 
the plurilateral WTO Agreement on Government Procurement.  
19. There has been no significant change to the IPR regime in Malaysia during the review p eriod. 
Enforcement, despite having improved, remains an area of concern.  Malaysia ratified the Protocol 
Amending the TRIPS Agreement on Public Health in December 2015.   
Sectoral Policy Developments  
20. Malaysia has a dichotomous agricultural structure with lar ge plantations dominating palm oil 
production and small producers dominant in other sectors. Several large corporations with 
international activities are responsible for a large proportion of production and processing of palm 
oil. While the area under rubb er trees has declined relative to the mid -2000s, rubber remains 
important in terms of agricultural production and as an input to industry, with both domestic 
production and imports of natural rubber being used. Although rice production represents a 
relativ ely small part of the total value of agricultural production, the Government has continued to 
prioritize the sector, which is dominated by small -scale producers, through self -sufficiency targets 
(which also apply to fruits, vegetables, and livestock), mini mum prices, input subsidies, and direct 
payments to producers. In general, small -scale producers tend to be supported by the 
Government, while large plantations tend to be taxed.  
21. Petroleum and gas remain important to the economy , contributing about 10.5% to GDP and 
about 14% to government revenues  in 2016 . The sector is dominated by the state -owned 
company PETRONAS, which has exclusive ownership of all oil and gas deposits and exclusive rights 
for exploration and production in Malaysia, both on land and of fshore, and responsibility for 
planning and investment. It is also responsible for regulation of upstream activities.  Exploration, 
development and exploitation of petroleum and gas takes place through production sharing or risk 
service contracts between oi l companies and a subsidiary of PETRONAS. Another subsidiary of 
PETRONAS, MISC Bhd, is a major energy shipping company with a large fleet of tankers and LNG 
vessels. In addition to producing crude oil, Malaysia also imports crude for refining. Although the  
value of both exports and imports of petroleum products and natural gas has declined over the 
past few years, the volumes traded have increased significantly and investment continues, 
bringing Malaysia towards its objective of being a principal hub for oi l and gas in the Asia -Pacific 
area. At end -2014, subsidies for petrol and diesel were removed although regulated prices 
continue to be applied. Subsidies remain for LPG and regulated prices of gas to the power sector 
are being increased.  
22. In line with  the E leventh Malaysia Plan, 18 services subsectors were liberalized in 2012  and 
up to 100% foreign equity participation is now allowed for wholesale and retail trade, healthcare, 
professional services, environmental services, courier, and education subsectors. Since then , 
progress has slowed , although foreign equity restrictions in unit trust management companies and 
in credit rating agencies were remove d in 2014 and 2017, respectively . However restrictions 
remain in several sectors including telecommunications,  transport, and investment banks.  
23. Under the Malaysian Aviation Commission Act of 2015, the Malaysian Aviation Commission 
was established, taking over some of the responsibilities of the Ministry of Transport, including 
economic regulation, allocation and m anagement of air traffic rights, monitoring of slot allocations, 
and licensing of air services, ground handling, and aerodrome operators. All except two of 
Malaysia's airports are owned by the State, and the government -linked company, Malaysia Airports 
Bhd, manages five of the six international airports.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  24.  Malaysia has a well -integrated and mature financial sector, which has undergone 
consolidation over a number of years. The financial sector, which is comprised of banks, insurance, 
and capital markets, cont ributed 6.4% to GDP in 2016 with increasing levels of cross border 
activity. Furthermore, Malaysia is at the forefront of the global Islamic finance industry and has a 
highly developed Islamic finance sector. Islamic financial institutions operate in paral lel with 
conventional financial institutions, both offering a full range of financial products and services and 
often using the same infrastructure. Islamic banking has grown rapidly over the past ten years 
with its market share increasing from about 12% i n 2007 to 28% at the end of 2016. In addition, 
Malaysia issued more than 54% of the total global sukuk (Islamic bonds).  
25. Malaysia's diverse economic base and general openness to trade helped the economy to 
continue to grow through a difficult period caused by low commodity prices which affected several 
sectors, particularly petroleum and gas, and palm oil. Growth was also helped by pragmatic 
government policies such as the floating exchange rate, which allowed the Malaysian ringgit to fall 
against other curr encies while government revenues were supported by the introduction of the 
goods and services tax in 2015, despite the decline in oil -based revenues. On the other hand, the 
State remains very involved in the economy through government -linked enterprises an d their 
subsidiaries, and investment restrictions remain in some sectors. However, trade and investment 
policies are becoming more liberal as investment restrictions are being relaxed, and  Malaysia has 
expanded its network of trade agreements – both throug h ASEAN and on its own behalf. Given 
Malaysia's abundance of natural resources, strategic location, and pragmatic policies, growth 
should continue towards the goal of becoming a high -income country by 2020.  
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  1  ECONOMIC ENVIRONMENT  
1.1  Main Features of the Economy  
1.1.  Malaysia is an open and diverse middle -income economy. Services account for over 50% of 
GDP, followed by manufacturing, agriculture, mining and quarrying (including crude oil and natural 
gas), and construction. The economy is well integrated into regional and global value chains; as 
such, trade is vital to growth and economic development. Imports and exports of goods and 
services account for around 130% of GDP and the country has been running current account 
surpluse s for a number of years. Government debt remains manageable at under 53% of GDP in 
2016, while both unemployment and inflation remain low ( Table 1.1). 
Table 1.1 Selected macroeconomic indicators, 2013 -16 
 2013  2014  2015  2016  
National accounts (% age change, unless 
otherwise indicated)   
Real GDP (at 2010 prices)  4.7 6.0 5.0 4.2 
Consumption  6.9 6.4 5.7 4.9 
Private consumption  7.2 7.0 6.0 6.0 
Government consumption  5.8 4.4 4.4 0.9 
Gross fixed capital formation  8.1 4.8 3.6 2.7 
Exports of goods and non -factor services  0.3 5.0 0.3 1.1 
Imports of goods and non -factor services  1.7 4.0 0.8 1.1 
XGS/GDP (%) (at current market price)  75.6 73.8 70.6 67.7 
MGS/GDP (%) (at current market price)  67.1 64.5 62.9 61.0 
Unemployment rate (%)  3.1 2.9 3.1 3.4 
Productivity (%age change)   
Labour productivity  -0.9 3.7 3.4 3.5 
Prices and interest rates   
Inflation (CPI, %age change)  2.1 3.2 2.1 2.1 
Fixed 3 -months deposit rate (%)  2.97 3.05 3.13 3.03 
Savings deposit rate (%)  1.01 1.03 1.06 1.00 
Exchange rate      
RM/US$ (annual average)  3.15 3.27 3.91 4.15 
Real effective exchange rate (% age change)  0.5 -0.7 -8.0 -4.3 
Nominal effective exchange rate (% age change)  0.4 -1.8 -9.1 -5.3 
Overall government balance (% of GDP)  -3.9 -3.5 -3.3 -3.2 
Current government balance  0.2 0.1 0.2 0.2 
Current revenue  20.9 19.9 18.9 17.3 
Tax revenue  15.3 14.8 14.3 13.8 
Current expenditure  20.7 19.8 18.7 17.1 
Development expenditure, net  4.1 3.6 3.5 3.4 
Government total debt (end -period)  53.0 52.7 54.5 52.7 
Domestic  37.4 37.5 37.4 35.4 
External  15.6 15.2 17.1 17.3 
Saving and investment (% of GDP)      
Gross national savings  29.4 29.4 28.1 28.1 
Gross domestic investment (gross fixed capital 
formation)  25.9 25.0 25.1 26.0 
Savings -investment gap  3.5 4.4 3.0 2.0 
External sector (% of GDP, unless otherwise 
indicated)      
Current account balance  3.5 4.4 3.0 2.4 
Net merchandise trade  9.5 10.2 9.4 8.2 
Merchandise exports  62.6 61.4 58.8 55.8 
Merchandise imports  53.1 51.1 49.4 47.5 
Services balance  -0.9 -1.0 -1.8 -1.6 
Capital account  0.0 0.0 -0.1 0.0 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   2013  2014  2015  2016  
Financial account  -2.0 -7.2 -4.8 -0.1 
Direct investment  -0.6 -1.6 -0.2 1.1 
Balance -of-payments  1.4 -3.3 0.3 1.2 
Merchandise exports (%age change in RM)  -1.1 6.5 0.4 0.7 
Merchandise imports (%age change in RM)  1.7 4.5 1.2 2.2 
Service exports (%age change in RM)  5.9 3.7 -1.1 7.5 
Service imports (%age change in RM)  6.3 4.3 5.7 5.5 
Gross official reserves (US$ billion, end -period)  134.9  115.9  95.3 94.5 
in months of retained imports  9.5 8.3 8.4 8.7 
Total external debt (US$ billion; end -period)  221.1  228.5  214.3  220.8  
of which short term  107.5  111.2  90.1 90.9 
Source:  Bank Negara Malaysia online information; data provided by the authorities; and IMF, International 
Financial Statistics.  
1.2  Recent Economic Developments  
1.2.  During the period under review, real GDP growth averaged nearly 5% annually, and is 
expected to be in exce ss of 5% in 2017.1 However, after peaking at 6% in 2014, the rate of 
growth declined ( Table 1.1). Despite a number of external and domestic shocks since late 2014, 
including global commodity price and financial market volatility, weak external demand, spillovers 
from China, and domestic political controversy, the economy has remained resilient. It w as able to 
do so because of the diversified production and export base, strong balance sheet positions, a 
flexible exchange rate, responsive macroeconomic policies, and deep financial markets.  
1.3.  During the period under review, growth was driven by domestic demand, which was reflected 
in the construction and services sectors. Within the services sector, the growth of wholesale and 
retail trade, restaurants and hotels, transport, storage and communications, and real estate and 
business activities was particula rly pronounced ( Table 1.2). In contrast, the agricultural sector  
contracted; while mining and quarrying (which includes crude oil and natural gas) grew, albeit at a 
declining rate. These changes are due to a significant fall in global commodity prices as well as the 
adverse impact of the weather on agricultural production.  
Table 1.2 Basic economic and social indicators, 201 3-16 
 2013  2014  2015  2016  
Real GDP at market price (US$ million, 2010 prices)  303,113  309,347  272,271  267,152  
Real GDP at market price (RM million, 2010 prices)  955,080  1,012,449  1,063,355  1,108,227  
Current GDP at market price (US$ million)  323,276  338,066  296,434  296,535  
Current GDP at market price (RM million)  1,018,614  1,106,443  1,157,723  1,230,120  
GDP per capita at current market price (US$)  10,882  11,184  9,649  9,508  
GDP by economic activity at constant 2010 prices (% age 
change)     
Agriculture  2.0 2.0 1.3 -5.1 
Mining and quarrying  1.2 3.3 5.3 2.2 
Manufacturing  3.4 6.1 4.9 4.4 
Construction  10.6 11.7 8.2 7.4 
Electricity, gas and water  4.4 3.8 3.6 5.4 
Services  6.0 6.8 5.2 5.6 
Wholesale and retail trade; motor vehicles  6.3 8.9 6.9 6.2 
Restaurants and hotels  5.9 6.5 6.4 7.1 
Transport, storage, and communication  7.3 8.1 7.9 7.1 
Finance and insurance  2.0 2.3 -0.7 2.5 
Real estate and business activities  8.0 8.0 6.5 6.9 
Government services  7.4 6.3 4.0 4.9 
Other services  5.6 4.8 4.7 4.8 
Import duties  5.7 10.0 18.6 8.8 
                                                
1 Information provided by the authorities.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   2013  2014  2015  2016  
GDP by economic activity at current prices (%)      
Agriculture  9.1 8.9 8.5 8.7 
Mining and quarrying  10.2 9.9 9.0 8.5 
Manufacturing  22.8 22.9 22.7 22.3 
Construction  4.2 4.4 4.7 4.9 
Electricity, gas and water  2.7 2.8 2.7 2.7 
Services  49.9 50.1 51.2 51.7 
Wholesale and retail trade; motor vehicles  14.4 15.0 15.7 15.9 
Restaurants and hotels  2.8 2.8 3.0 3.1 
Transport, storage, and communication  8.4 8.5 8.8 9.0 
Finance and insurance  7.1 6.8 6.6 6.4 
Real estate and  business activities  4.1 4.1 4.3 4.4 
Government services  8.8 8.6 8.4 8.4 
Other services  4.3 4.2 4.3 4.3 
Import duties  1.1 1.1 1.3 1.3 
Share of sector in total employment      
Agriculture, forestry and fishing  13.0 12.2 12.5 11.4 
Mining and quarrying  0.6 0.6 0.7 0.7 
Manufacturing  17.1 17.1 16.5 16.9 
Electricity, gas and water  1.1 1.1 1.0 1.1 
Construction  9.5 9.2 9.3 8.8 
Services  58.7 59.7 60.0 61.1 
Wholesale and retail trade, repair of motor vehicles 
and motor cycles  16.7 16.8 16.8 17.1 
Accommodation and food service activities  7.7 8.3 8.2 8.9 
Transport and storage  4.6 4.3 4.4 4.5 
Information and communication  1.4 1.5 1.5 1.5 
Financial and insurance activities  2.4 2.4 2.5 2.4 
Real estate  0.5 0.6 0.5 0.6 
Professional, scientific and technical activities  2.3 2.4 2.6 2.6 
Administrative and support service activities  4.2 4.7 4.5 4.6 
Public administration and defence  5.6 5.4 5.3 5.3 
Education  6.0 6.3 6.4 6.6 
Human health and social work activities  3.6 3.8 4.1 4.0 
Other services  3.6 3.3 3.2 3.1 
Source:  Bank Negara Malaysia online information.  
1.4.  According to the IMF, risks to the growth outlook stem from both external and domestic 
factors.2 External risks include structurally weak growth in advanced and emerging markets 
resulting in sustained lower commodity prices. Heightened global financial stress and associated 
capital flows could also have an adverse impact on domestic markets.  
1.5.  On the d omestic front, risks arise from public sector and household debt levels as well as 
certain vulnerabilities in the corporate sector. Furthermore, according to the IMF, relatively high 
government debt and contingent liabilities limit policy space to respond to shocks. However, the 
authorities feel that the concern regarding  high government debt and contingent liabilities is no 
longer valid as Malaysia's  debt level is significantly below the self -imposed limit of 55% of GDP.  
1.6.  The authorities are cognizant of t he above risks and realize that the external economic and 
financial environment will remain fraught with uncertainty and that they need to remain vigilant. 
However, they feel that Malaysia's diverse economic structure, strong fundamentals and buffers 
built up over a number of years will hold it in good stead.  
1.7.  The authorities reiterated their commitment to fiscal sustainability and the continuous 
improvement of fiscal policy through diversifying revenue, reviewing expenditure, improving the 
                                                
2 IMF Country Report No. 17/101.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  tax system, and monitoring and mitigating fiscal risks. Furthermore, according to the authorities, 
contingent liabilities, although considerable, do not pose a risk, as guarantees have been 
strategically provided to non -financial entities with healthy balance sheets. The authorities also 
emphasized that the flexible exchange rate would continue to adjust and absorb shocks and the 
current reserve level was adequate to smooth volatility. Banks continue to be well capitalized and 
have ample liquidity; they would be in a good position to deal with increased vulnerabilities 
relating to household and corporate debt.  
Monetary policy and exchange rate policy  
1.8.  The objective of monetary policy is "to maintain price stability while giving due regard to the 
developments in the economy " from the Bank Negara Malaysia , which in recent years has implied 
long-term inflation of about 3% with positive low real interest rates conducive to sustainable 
growth of the economy.  
1.9.  With a view to fostering growth against a relatively benign inflationar y environment, the 
central bank, Bank Negara Malaysia (BNM), has pursued an accommodative monetary policy. 
BNM's main policy instrument is the overnight policy rate (OPR).  
1.10.   After maintaining the OPR at 3.25% since July 2014, the BNM reduced it by 25 basis p oints 
to 3% in July 2016 and maintained it at that level following a review in September 2017, thereby 
reaffirming that, with the current level of the OPR, the degree of monetary accommodativeness is 
consistent with the policy stance to support growth in a  stable price environment.  
1.11.   The IMF classifies Malaysia's exchange rate regime as "other managed". However, the 
authorities consider that, in practice, it is closer to "floating". As such, Malaysia has relied on the 
foreign exchange reserves and the flexibi lity of the exchange rate to cushion the impact on the 
economy of volatile capital flows and terms of trade shocks (fall in global commodity prices).  
1.12.   The ringgit has depreciated by over 30% against the US dollar compared to its value in 
2013. This was due mainly to large portfolio outflows in 2014, with the BNM allowing the exchange 
rate to adjust to these outflows. Additionally, the BNM also intervened in the foreign exchange 
market by using reserves to cushion the impact of the outflows and maintain order ly market 
conditions.  
1.13.   Inflation, as measured by the consumer price index, peaked at 3.2% in 2014; however, it 
has since moderated to 2.1%, which is at the lower end of the BNM's forecast range of 2 -3%. 
Inflation declined mainly due to lower domestic fuel prices. Additionally, moderate domestic 
demand and a subdued external price environment also helped dampen domestic inflationary 
pressures.  
Fiscal policy  
1.14.   During the review period, Malaysia continued to run a fiscal deficit, albeit at a declining rate, 
reaching 3.1% of GDP in 2016. The fiscal deficit being due entirely to development expenditure, as 
the balance on current revenue and expenditure remained positive.  
1.15.   Current revenue declined from nearly 21% of GDP in 2013, to around 17% of GDP in 2016. 
The decline came about as a result of a fall in oil and gas revenues, which was due to a decline in 
oil and gas prices. It is estimated that the fall in oil - and gas -related revenue was 3.7% of GDP 
over 2014 -17.3 However, the impact of lower oil - and gas -related revenue was mitigated to a large 
extent by the introduction of the goods and services tax (GST) in 2015, which increased revenue 
by around 1.5% of GDP between 2014 and 2017.  
1.16.   Current expenditure also declined from 20.7% of GDP to 17.1% of GDP over the re view 
period. The reduction in expenditure came about due to the rationalization of untargeted fuel and 
other subsidies, which started in 2013. Additionally, spending optimization  measures across 
ministries and agencies  also helped reduce expenditure  and sustain revenues , as did  a 
                                                
3 IMF Country Report No. 17/101.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  reprioritization  of programmes and projects with high multiplier effect coupled with lagged 
adjustment in the PETRONAS dividend.4  
1.17.   As a result, total government debt declined to 52.7% of GDP in 2016, which is below the 
government's  self-imposed limit of 55%.  
Structural reforms  
1.18.   The authorities envisage sustaining growth and achieving high -income status by 2020.5 In 
this regard , the 11th Malaysia Plan lays out a comprehensive reform agenda to transform Malaysia 
into a productivity -driven and knowledge -based economy.  
1.19.   The plan focuses on, inter alia : the labour market, education, skills productivity and 
innovation. Within the labour market , policies are geared towards increasing the female 
participation rate, through providing for more flexible work arrangements and creating more 
opportunities for women in all fields of education and jobs. In this regard, measures taken by the 
authorities include the launching of a portal (Flexworklife.my) in June 2013, which aims to build a 
network of e mployers and  talent  to optimize work -life integration. Furthermore, with a view to 
encouraging women to return to the workforce, the authorities launched a career comeback 
programme. It provides financial incentives for employers to implement programmes to  recruit and 
retain women who have been on career breaks.  
1.20.   Under the plan, Malaysia has set a productivity growth target of 3.7% annually between 
2016 and 20 20. In this regard, efforts to boost productivity will focus on accelerating innovation 
and entrepre neurship and leveraging advancements in technology. The authorities stated  that the 
measures envisaged include : restructuring the workforce by raising the number of high -skilled 
workers, tightening entry of low -skilled workers, and meeting demands of the f uture economy; 
strengthening the readiness of enterprises to effectively adopt and exploit technology and digital 
advantage, such as the Fourth Industry Revolution; addressing regulatory constraints and 
developing a robust accountability system to ensure e ffective implementation of regulatory 
reviews;  and driving accountability in productivity performance through an effective governance 
mechanism.   
1.21.   Important gains have been made in access to, and gender equality in education. However, 
according to the autho rities, the standard of education needs to be improved. In this regard, the 
Malaysian Education Blueprint 2013 -25 is aimed at improving the quality of school education 
through curriculum transformation, improving the quality of teachers and increasing Engl ish 
proficiency. Additionally, efforts are also underway to make technical and vocational training more 
appealing. With a view to increasing productivity and efficiency, skill mismatches and  the 
up-skilling  of female and elderly workers are also being addr essed. As such, the Ministry of 
Education, has upgraded 80 vocational schools to vocational colleges since 2012 offering 
vocational courses and awarding students with the Malaysian Vocational Diploma (DVM). To date , 
over 90% of the graduates have  gained em ployment  in their  related  field. 
1.22.   According to the IMF, to move to a knowledge -based economy, policies should continue to 
encourage R&D, including through streamlining institutional arrangements. The authorities are in 
the process of finalizing a strategy t o boost productivity and aim to double the share of R&D 
spending in GDP by 2020 from its 2012/13 level.  
1.2.1   Balance of payments  
1.23.   During the period under review, Malaysia' s current account surplus declined from 3.5% of 
GDP in 2013 to 2.4% of GDP in 2016, reflec ting a narrowing of the difference between gross 
national savings and gross national investment ( Table 1.3). 
 
 
                                                
4 IMF Country Report No. 16/110.  
5 BNM Annual Report 2016.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 1.3 Balance of payments, 2013 -16 
(RM million)  
 2013  2014  2015  2016  
Current account balance  35,485.3  48,553.6  35,154.8  29,023.4  
Goods  and services balance  86,959.0  102,620.4  88,592.0  82,292.1  
Goods balance  96,551.5  113,326.7  109,223.6  101,382.4  
Exports  637,682.5  678,865.1  681,274.8  686,075.3  
Imports  541,131.0  565,538.4  572,051.2  584,692.8  
Services balance  -9,592.5  -10,706.2  -20,631.6  -19,090.4  
Exports  132,685.0  137,618.3  136,095.5  146,313.1  
Transportation  14,701.2  15,616.6  16,364.6  16,792.2  
Travel  67,732.9  73,950.6  68,674.9  74,975.0  
Imports  142,277.5  148,324.5  156,727.0  165,403.5  
Transportation  38,610.2  41,666.1  40,929.8  40,305.2  
Travel  38,566.1  40,717.6  41,733.8  43,448.7  
Income balance  -33,975.2  -36,653.8  -32,111.9  -34,604.1  
Compensation of employees  -4,006.7  -4,901.5  -5,595.4  -5,636.3  
Investment income  -29,968.5  -31,722.3  -26,516.5  -29,003.9  
Current transfers (net)  -17,498.5  -17,443.0  -21,325.3  -18,628.5  
Capital account  -15.0 344.1  -1,135.6  107.6  
Financial account  -20,216.2  -79,954.5  -55,350.5  -1,126.2  
Direct investment  -6,275.7  -17,973.6  -1,810.2  14,130.5  
Malaysia's direct investment abroad  -44,450.4  -53,573.7  -41,186.8  -33,051.9  
Direct investment in Malaysia  38,174.7  35,600.0  39,376.6  47,182.4  
Portfolio investment  -3,012.0  -39,353.9  -26,122.1  -15,418.8  
Assets  -32,088.3  -28,112.0  -9,098.1  -15,010.8  
Liabilities  29,076.3  -11,241.9  -17,024.1  -408.0  
Financial derivatives  -253.4  -975.0  -663.1  -802.1  
Other investment  -10,675.1  -21,651.9  -26,755.0  964.2  
Public sector  -3,965.0  1,082.8  -1,878.0  -3,032.6  
Private sector  -6,710.2  -22,734.7  -24,877.0  3,996.8  
Net errors and omissions  -605.3  -5,450.7  25,081.6  -13,226.2  
Overall balance of payments  14,648.7  -36,507.4  3,750.3  14,778.5  
Source:  Bank Negara Malaysia (Central Bank of Malaysia) online information. Viewed at: 
http://www.bnm.gov.my/index.php?ch=en_publication&pg=en_msb&ac=243&en&uc=2 .  
1.24.   After rising to 4.4%  of GDP in 2014, the current account surplus declined due to a fall in the 
surplus for trade -in-goods as import growth outpaced exports . The faster decline in the value of 
exports was caused by the fall in world commodity prices. However, export volumes rose due to 
higher demand from major trading partners and increased commodity production as earlier 
investment projects came on stream. The ringgit depreciation also helped mitigate some of the 
adverse price affects. Imports were less affected due to strong domestic demand, capacity 
expansion, and implementation of large infrastructure projects.  
1.25.   In ringgit  terms, the services deficit almost doubled, from RM 9.6 bi llion to RM 19.1 billion, 
from 2013 to 2016. The increase in the deficit was due mainly to the higher usage  of foreign 
professional, technical and engineering services particularly in the aviation, oil and gas , and 
utilities sectors.6  
1.26.   Net payments in lieu  of transport services have declined since 2014 on account of both 
lower payments and higher receipts of transport services , while the surplus on the travel account 
has narrowed, reflecting the higher number of Malaysians travelling abroad and a relatively  slower 
increase in inbound travellers ( Table 1.4). 
                                                
6 BNM Annual Report 2016.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 1.4 Trade in services, 2013 -16 
 2013  2014  2015  2016  
Total credit (RM billion)  132.7  137.6  136.1  146.3  
 % of total credit  
Maintenance and repair  0.7 0.9 1.1 1.0 
Construction  2.4 2.0 3.0 2.8 
Transport  11.1 11.3 12.0 11.5 
Travel  51.0 53.7 50.5 51.2 
Insurance and pension services  1.1 1.1 1.1 1.0 
Financial services  0.8 0.8 1.0 1.4 
Charges for the use of intellectual property n.i.e.  0.3 0.2 0.3 0.3 
Telecommunications, computer, and information services  6.8 6.6 7.6 6.8 
Oher business services  19.5 16.7 16.0 16.2 
Personal, cultural and recreational services  0.5 0.7 1.1 1.0 
Government services  0.2 0.2 0.3 0.2 
Othera 5.6 5.8 6.2 6.5 
Total debit (RM million)  142.3  148.3  156.7  165.4  
 % of total debit  
Maintenance and repair  0.7 0.7 0.9 1.0 
Construction  5.7 5.8 6.7 7.4 
Transport  27.1 28.1 26.1 24.4 
Travel  27.1 27.5 26.6 26.3 
Insurance and pension services  6.1 6.1 5.9 5.7 
Financial services  1.0 0.9 1.1 1.3 
Charges for the use of intellectual property n.i.e.  3.1 3.1 3.2 3.4 
Telecommunications, computer, and information services  7.1 6.9 8.1 7.7 
Oher business services  19.6 18.2 18.5 20.2 
Personal, cultural and recreational services  1.9 2.1 2.0 1.9 
Government services  0.4 0.4 0.6 0.6 
Othera 0.1 0.1 0.1 0.2 
a Manufacturing services on physical inputs owned by others.  
Source:  Bank Negara Malaysia (Central Bank of Malaysia) online information. Viewed at: 
http://www.bnm.gov.my/index.php?ch=en_publication&pg=en_msb&ac=243&en&uc=2 .  
1.27.   The income account continues to remain in deficit as incomes accrued to Malaysian 
companies investing abroad, particularly in the mining and services sector s, were impacted by 
weaker global demand, while foreign investors in Malaysia, particularly in the manuf acturing 
sector , continue to earn sizable profits. Outflows of foreign worker remittances have also remained 
robust reflecting the increased reliance on foreign workers in the labour -intensive sectors of the 
economy.7  
1.28.   The deficit on the financial account improved as direct investment in Malaysia rose while 
portfolio outflows declined from their peak in 2014. Furthermore, other investments recorded a 
surplus. The turnaround was due to loan repayments by non -resident financial institutions to 
Malaysian banks  and the maturity of overseas deposits held by Malaysian banks. The slowdown in 
trade also resulted in lower trade credits. On the whole , the balance of payments recorded a 
surplus of around RM 15 billion in 2016. Consequently foreign exchange reserves ros e to 
RM 423.9  billion (US$94.5 billion) at the end of 2016 providing nearly nine months of retained 
import cover.  
1.3  Developments in Trade and Investment  
1.3.1   Trends and patterns in merchandise and services trade  
1.29.   As an extremely open and diverse economy that is we ll integrated into regional and global 
value chains, Malaysia is dependent on trade. Trade in goods and services, as a proportion of GDP , 
                                                
7 BNM Annual Report 2016.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  was nearly 130% in 2016. After peaking at over RM 113 billion in 2014, the trade in goods surplus 
declined to RM 101 b illion in 2016. The decline was due to weak global demand and the fall in 
global commodity prices. On the other hand, the services deficit doubled during the review period 
mainly on the back of increased usage of foreign professional services.  
1.3.1.1   Composition of merchandise trade  
1.30.   Malaysia 's export composition reflects the diversified nature of the economy. In 2016, 
manufacturing accounted for 68% of exports, while mining products (including crude oil and 
natural gas) and agriculture were responsible for 17.9% a nd 13.5% of exports respectively ( Chart 
1.1 and Table A1. 1). 
Chart 1.1 Product composition of merchandise trade, 2013 and 2016  
 
Source:  UNSD, Comtrade database (SITC Rev.3).  
Chart 1.1  Product composition of merchandise trade, 2013 and 2016
2013 2016
(a)    Exports (f.o.b.)
Other consumer goods
8.8%
Manufactures
60.6%
Total:   US$228.3 billion Total:  US$189.4 billion
(b)    Imports (c.i.f.)
Chemicals
9.0%Iron & steel
3.6%Transport equipment
7.1%
Manufactures
65.9%
Office machines &
telecommunication 
equipment
21.9%Other electrical
machines  
5.7%
Non-electrical 
machinery
7.9%Non-electrical 
machinery
8.8%Other
1.8%
Other electrical 
machines
6.0%Office machines & 
telecommunication 
equipment
30.4%
Other semi -manuf.  
4.9%Transport equipment
6.6%
Chemicals
10.2%Manufactures
72.5%
Office machines &
telecommunication
equipment
23.9%
Total:   US$205.8 billion Total:   US$168.4 billionManufactures
68.0%Other electrical
machines
6.1%Fuels
14.0%Other electrical 
machines
5.2%
Other consumer goods
8.8%Other
2.2%Mining
17.9%
Office machines & 
telecommunication 
equipment
27.7%Textiles & clothing  
2.8%Other
0.6%
Other semi -manuf.  
5.1%
Non-electrical 
machinery
4.7%Other agriculture
8.7%
Fuels
22.3%
Source :  UNSD, Comtrade database (SITC Rev.3).Other consumer goods
6.4%
Mining
15.3%Other consumer 
goods  10.8%
Textiles & clothing
3.3%
Other 
semi-manuf.
5.8%Non-electrical 
machinery
3.7%
Other semi -manuf.
4.2%Mining
25.6%Other agriculture
8.7%
Agriculture
10.4%Agriculture
9.7%
Mining
22.2%
Iron & steel
3.2%Other mining  
3.3%Other mining 
3.9%
Chemicals
6.6%Chemicals  
7.6%Other 
0.6%
Fuels
10.3%
Fuels
16.2%
Other mining
5.0%
Other mining  
6.0%Agriculture
13.5%Palm oil & its fractions
4.8%Palm oil & its fractions
5.4%
Agriculture
13.2%WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  1.31.   During the period under review, the share of agriculture rose slightly. While  prices fell 
significantly in US dollar terms, including for palm oil ( Malaysia' s main agricultural export), the 
depreciation of the ringgit helped boost export volumes. The decline in the share of mining 
exports, which comprise mainly oil and gas, was due to the decl ine in the global prices of these 
commodities. In contrast , the share of manufactured goods rose. Within manufactures, growth 
was driven by increased exports of electronic integrated circuits and micro assemblies, mainly 
semiconductors. Exports of these we re boosted by the weaker currency, and the acquisition of 
advanced packaging technology for semiconductors, which is in line with moving up the value 
chain in manufacturing.   
1.32.   The structure of Malaysia' s imports is also reflective of the diverse nature of t he economy 
and its integration into value chains. During the review period , the share of primary products in 
imports declined due to a fall in global commodity prices (Chart 1.1 and Table A1. 2). On the other 
hand, the share of manufactures, particularly of electronic integrated circuits and micro 
assemblies, increased. These are used in semiconductor assembly and test production.  
1.3.1.2   Direction of merchandise trade  
1.33.   In 2016,  Malaysia' s main export destinations were Singapore, China, and the E uropean 
Union . During the period under review, the shares of Singapore, the E uropean Union , and the 
United States rose (Chart 1.2 and Table A1. 3). The share of the United States rose on the back of 
increased semiconductor exports, while those to Singapore and the European Union  rose on the 
back of increased exports of optical and scientific products. In contrast , the shares of China and 
Japan declined. Malaysia' s exports to China comprise manufactures, which are part of the regional 
supply chain, as well as palm oil and other non -oil commodities. The reason for the decline is a fall 
in commodity prices . Exports to Japan consist of mainly LNG. With the coming back online of 
nuclear power plants in Japan, demand for LNG has fallen resulting in its declining share.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Chart 1.2 Direction of merchandise trade, 2013 and 2016  
 
Source:  UNSD, Comtrade database.  
1.34.   China remains Malaysia' s largest import supplier followed by Singapore and the European 
Union  (Chart 1.2 and Table A1. 4). During the period under review , the share of China rose 
significantly a s did that of Asia as a whole. In contrast , the shares of Singapore, the European 
Union  and ASEAN declined over the same period.  
1.3.2   Trends and patterns in FDI  
1.35.   Malaysia' s relatively liberal foreign investment regime and ease of doing business have 
resulted in robust FDI inflows for a number of years ( Chart 1.3). However, since 2014 , FDI inflows 
have moderated due mainly to lower investments in the mining and manufacturing s ectors. The 
Chart 1.2  Direction of merchandise trade, 2013 and 2016
2013 2016
(a)    Exports (f.o.b.)
Other Asia
45.9%
Total:   US$228.3 billion Total:  US$189.4 billion
(b)    Imports (c.i.f.)
Other 
8.0%China
16.4%
EU-28
10.8%
Middle East
4.6%Singapore
12.4%United States
7.8%
EU-28
9.9%China
20.4%
Thailand
6.1%
Singapore
10.4%United States
8.0%
Total:   US$205.8 billion Total:   US$168.4 billionOther Asia
40.8%
Middle East
2.9%Japan
11.0%
Middle East
3.9%Korea,  Rep. of
5.2%Korea, Rep. of  
4.7%United States
8.1%Other Asia
9.5%
United States
10.2%Other 
6.5%
Source :  UNSD, Comtrade database.Japan
8.2%China
12.5%
Singapore
14.6%EU-28
10.2%China
13.5%
Middle East 
3.4%Singapore
13.9%
Other Asia
47.0%Other Asia
42.0%Japan
8.7%
Other
6.7%Other Asia
7.2%Hong Kong,
China
4.8%
EU-28
9.1%Other
5.5%India  
3.6%
Australia
4.1%Hong Kong, 
China
4.3% Japan
8.1%
Thailand
5.6%Other Asia
8.0%
Thailand 
6.0%Other Asia   
7.4%Chinese Taipei
6.0%Chinese  Taipei
4.9%
Indonesia
4.3%Indonesia
4.2%Thailand
5.5%Australia
3.4%
Indonesia
3.5%
Indonesia
4.6%
ASEAN
24.6%ASEAN
26.7%ASEAN
29.4%ASEAN
28.0%
Other ASEAN
4.0%Other ASEAN
4.1%Other ASEAN
3.9%Other ASEAN
5.7%India
4.1%WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  challenging global economic environment resulted in many large multinational corporations, 
especially in the electronics sector, undergoing restructuring and consolidation of their operations 
in Malaysia. Lower oil and gas prices also resulted in a decline in FDI in the upstream oil and gas 
industry. On the other hand , FDI in the services and construction sectors increased on the back of 
a large investment by China General Nuclear in 13 power plants in Malaysia and abroad, as well as 
continued e xpansion in the finance and insurance and the retail and wholesale trade services 
sectors. The ongoing residential and infrastructure projects such as those in the Klang Valley and 
Iskander Malaysia have also attracted FDI. The largest investors in Malaysi a are Singapore, Japan, 
the Netherlands, China and the United States.  
Chart 1.3 Foreign direct investment, 2000 -16 
 
Source:  UNCTAD, World Investment Report 2017 online information.  
1.36.   The growth of the Malaysian economy has resulted in the growth of Malaysian companies, 
which have invested their earnings and savings abroad. As such, there is considerable direct 
investment abroad (DIA) by Malaysian companies. DIA is concentrated in the services sectors  – 
underscoring the growing regionalization of Malaysian companies in the finance, insurance, real 
estate and business services, information and communication , and utilities sub -sectors  – followed 
by sizable investments in the mining and agricultural sectors.  
1.37.   The bulk of DIA is channelled into regional economies namely: Singapore ; Indonesia;  and to 
a lesser extent Hong Kong, China; India;  and Thailand. There is also considerable DIA in Canada 
and Australia. Furthermore, a considerable amount of DIA is invested  in international offshore 
financial centres, where investible funds are pooled before being redirected to economic sectors in 
various locations.  
 
02468101214161820
020406080100120140160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
FDI inward stock FDI outward stock FDI inflow FDI outflowChart 1. Foreign direct investment
(US$ billion) (US$ billion)
Source:  UNCTAD, World Investment Report 2017 online information.Left-hand scale: Right -hand scale:WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  2  TRADE AND INVESTMENT  REGIMES  
2.1  General Framework  
2.1.  Malaysia is a constitutional monarchy. The Co nstitution came into force in 1957. Malaysia is a 
federation of 13 states and 3 federal territories (Kuala Lumpur, Putrajaya, and Labuan). Since the 
previous Review in 2014, there has been no change to the constitutional and institutional 
framework.  
2.2.  The legislative authority of the Federation is vested in Parliament, consisting of the Yang di -
Pertuan Agong (Head of State) and the two Houses of Parliament: the Senate (Dewan Negara) and 
the House of Representatives (Dewan Rakyat). The Dewan Negara is ma de up of 70 appointed 
members, and t he Dewan Rakyat of 222 elected members.  A law is made when a bill is passed by 
both Houses and has received royal assent from the Yang di -Pertuan Agong, which is deemed 
given if the bill is not assented to within 30 days  of presentation and publication  in the Federal 
Government Gazette.  
2.3.  Each state has its own state constitution, executive council, and legislative assembly. Under 
Article 74 of the Constitution,  Parliament has exclusive power to make federal laws over matt ers 
falling under the Federal List, and shared power (shared with the state legislatures ) to make laws 
on matters under  the Concurrent List  in the Ninth Schedule . Matters falling under federal 
competence include: external affairs, trade, commerce, industry , shipping, fisheries, 
communications, and transport.  
2.4.  The executive power of the Federation is vested in the Head of State (Yang di -Pertuan 
Agong) and exercisable by him or the Cabinet, which is presided over by the Prime Minister. The 
fifteenth  and curre nt Head of State began his reign on 13 December 2016, after being elected in 
October 2016.  
2.5.  Malaysia's judicial system consists of:  
a. superior courts: the Federal Court, the Court of Appeal, the High Court in Malaya, and 
the High Court in Sabah and Sarawak;  and 
b. subordinate courts:  the sessions courts and the magistrates' courts.  
2.6.  Among the superior courts, the Federal Court is the highest and final court of appeal in 
Malaysia, followed by the Court of Appeal and the two high courts. The jurisdiction of the sup erior 
court is set out in the Court of Judicature Act 1964 (Act 91), whilst the jurisdiction of the 
subordinate courts is stipulated in the Subordinate Courts Act 1948 (Act 91). The superior courts 
and the subordinate courts do not have any jurisdiction in  matters falling within the sphere of the 
Syariah courts. Syariah courts have jurisdiction only over Muslims in Malaysia on Syariah matters.1  
2.7.  Treaties or international legal instruments (including WTO agreements) are not implemented 
automatically; appropriate national legislation is required to give the treaty force of law 
domestically.   
2.8.  According to the World Bank's Doing Business Report, in Malaysia in 2017, resolving a 
standard contract enforcement dispute took 425 days and cost 37.3% of the clai m, placing  it 42nd 
out of  189 economies in the ease of enforcing contracts.2 Its performance is better than the East 
Asia and Pacific average (560  days and 49.1% of the claim).  
2.2  Trade Policy Formulation and Objectives  
2.2.1   Structure of Trade Policy Formulation  
2.9.  Trade and investment policies are formulated by the Ministry of International Trade and 
Industry (MITI). Key MITI agencies include the Malaysian Investment Development Authority 
                                                
1 A native court deals with cu ltural practices of the Iban community in Sarawak.  
2 World Bank (2017), Doing Business 2017 – Malaysia . Viewed at: 
http://www.doingbusiness.org/~/medi a/wbg/doingbusiness/documents/profiles/country/mys.pdf  [17/03/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  (MIDA), taking the lead in promoting manufacturing and services sectors; the Ma laysian External 
Development Corporation (MATRADE), responsible for export development and promotion 
activities; and the Malaysia Productivity Corporation (MPC), undertaking various activities related 
to monitoring and enhancing the productivity and compet itiveness of the economy. Other agencies 
include: SME Corporation Malaysia, SME Bank, Malaysian Industrial Development Finance, Halal 
Industry Development Corporation, Malaysia Automotive Institute, and Malaysia Steel Institute.3  
2.10.   MITI formulates industria l development, international trade, and investment policies and 
makes policy decisions in consultation with relevant stakeholders including: the Economic Planning 
Unit (EPU), responsible for developing Malaysia's five -year development plans; and the 
Perfor mance Management and Delivery Unit (PEMANDU), responsible for implementing the 
Government's Economic Transformation Programme. A Fiscal Policy Committee (FPC), chaired by 
the Prime Minister and comprising key ministers and the central bank governor, was es tablished in 
2013 to formulate policies to strengthen public finance as well as to monitor progress with respect 
to fiscal sustainability and long -term macroeconomic stability. In May 2016, a Fiscal Risk and 
Contingent Liabilities Technical Committee – a sub-committee of the FPC – was established to 
update the FPC on the potential sources of fiscal risks.  
2.11.   Malaysia's ongoing reforms since 2007 under the Special Taskforce to Facilitate Business 
(PEMUDAH) have been a joint effort between the Government and th e private sector to streamline 
regulatory frameworks, reduce business licensing requirements, and promote information 
technology use by government agencies. Malaysia was ranked 60th out of 193 economies in 2016 
by the United Nations in its e -Government sur vey.4 Information related to the Government is 
available at www.malaysia.gov.my , which is a gateway to multiple government online services. 
The Government applies a "No Wrong Door Policy" , meaning that  queries are  forwarded to and 
answered by the relevant ministry and agency. Legislation related to investment, in various 
languages, is available on MIDA's website ( http://www.mida.gov.my ).  
2.12.   On 16 October 2014, the Guidelines on Public Consultation Procedures were lau nched by the 
Chief Secretary to the Government of Malaysia, serving as a reference for ministries and agencies 
in implementing public consultations. According to the Government, public consultation is one of 
the key tools to improve transparency, efficienc y and effectiveness of regulation and is an 
important element of Regulatory Impact Analysis (RIA)5. Regular dialogues and consultations with 
the business community, including chambers of commerce and industry associations, are 
undertaken by various ministr ies and agencies to obtain feedback from the private sector. For 
example, the Malaysia Productivity Corporation (MPC) coordinates ministries and agencies in the 
performance of RIAs.6 
2.13.   The Malaysian Anti -Corruption Commission (MACC), established in 2009 unde r the MACC 
Act, is responsible for combating corruption through investigation, prevention and community 
action. The MACC has ratified the United Nations Convention against Corruption (UNCAC), and is 
involved in various bilateral, regional, and internationa l cooperation efforts to combat corruption.  
2.14.    The Governance and Integrity Committee (JITU) was set up via a directive from the Prime 
Minister on 3 June 2014 to elevate the integrity enhancement efforts of the government 
administrative system in all federa l and state government ministries, departments and agencies. 
The Auditor General's (AG) Dashboard and the Putrajaya Inquisition are further efforts to ensure 
greater transparency. The AG's Dashboard tracks and monitors the responses and actions taken by 
relevant government ministries, departments and agencies. Any issue that cannot be resolved at 
ministry/department/agency level is brought to the Putrajaya Inquisition. According to the Auditor 
General's report, from 2011 to 2015, a total of 4,904 cases were  tracked and monitored through 
the AG's Dashboard. As at 14 June 2017, 4,145 issues were resolved, while the remaining issues 
are under due process for corrective and punitive actions.  
                                                
3 MITI online information . Viewed at : http://www.miti.gov.my/index.php/pages/view/261?mid=49  
[20/03/17].  
4 UNPACS online information. Viewed at: https://publicadministration.un.org/egovkb/en -
us/Data/Country -Information/id/103 -Malaysia  [20/03/17].  
5 A RIA is  a system that analyses the positive and negative effects of proposed regulations at an early 
stage of policy -making.  
6 OECD (2016), Malaysia: Economic Assessment 2016 . Viewed at: 
http://www.oecd.org/eco/surveys/Malaysia -2016-OECD -economic -survey -overview.pdf  [24/03/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  2.2.2   Trade policy objectives  
2.15.   The long -term policy document Vision 2020 sets  Malaysia a target of achieving high -income 
country status by 2020, by sharply accelerating the growth of labour productivity to 3.7% per year 
on average from 2016 to 2020, from the average of 2% during the 2010 -15 period.7  
2.16.   The Economic Planning Unit (EPU) in the Prime Minister's Department developed the 
11th Malaysia Plan (11th MP) for 2016 -20, as the final part of Vision 2020. The main aim of the 
11th MP is to rebrand Malaysia as a centre for high technology and global activities. Strategies in 
the next five years include strengthening investment in the manufacturing and services sectors, 
and promoting both domestic and foreign investment.  It identified six strategic thrusts:  
a. enhancing inclusiveness towards an equitable society;  
b. improving well -being for a ll; 
c. accelerating human capital development for an advanced nation;  
d. pursuing green growth for sustainability and resilience;  
e. strengthening infrastructure to support economic expansion; and  
f. re-engineering economic growth for greater prosperity.  
2.17.    The 11th MP also highlighted six "game changers" to accelerate Malaysia's development: 
unlocking the potential of productivity; lifting the bottom 40% of households towards a middle -
class society; enabling industry -led technical and vocational education and traini ng; embarking on 
green growth; translating innovation to wealth; and investing in competitive cities.  
2.18.   In addition, there are a number of sectoral plans with trade and investment policy tools  to 
supplement the 11th MP (Table 2.1).  
Table 2.1 Sectoral plans, and trade and investment tools  
Sectoral plans  Trade and investment tools  
Third Industrial 
Master Plan 2006 -
20 Focuses on manufacturing, services, and agriculture sectors. Strategic thrusts include: 
enhancing Malaysia's position as a major trading nation; generating investment in the 
targeted sectors; strengthening the role of the private sector; and creating a more 
compet itive business environment  
Malaysia Education 
Blueprint 2013 -25 Involvement of private sector in vocational education  
Financial Sector 
Blueprint 2011 -20 Greater flexibility was allowed in 2013 for foreign banking institutions  
Services Sector 
Blueprint 2015-20 Partnership programmes between large and small enterprises to facilitate knowledge 
transfer for SMEs;  
Establishing a consortium to strengthen the competitiveness of Malaysian service 
providers;  
Enhancing the Services Export Fund;  
Enhancing franchise development programmes to raise capabilities across a broad group 
of services providers;  
Introducing the Research Incentive Scheme;  
Establishing the Incentive Coordination & Collaboration Office for better incentive 
management  
Logistics and Trad e 
Facilitation Master 
Plan Authorized Economic Operator (AEO) Programme;  
Mutual Recognition Arrangements (MRA);  
Strengthening the institutional and regulatory framework;  
Enhancing trade facilitation mechanisms;  
Developing infrastructure and freight demand;  
Strengthening technology and human capital;  
Internationalizing logistics services  
National Agrofood 
Policy 2011 -20 Promoting R&D, expanding international markets, and improving quality and safety  
                                                
7 OECD (2016), Malaysia: Economic Assessment 2016 . Viewed at: 
http://www.oecd.org/eco/surveys/Malaysia -2016-OECD -economic -survey -overview.pdf  [24/03/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Sectoral plans  Trade and investment tools  
National 
Commodity Policy 
2011-20 Enhancing regional and international cooperation;  
Branding of quality, sustainable and environmental friendly commodity -based products;  
Encouraging compliance with international standards;  
Expanding markets;  
Participating in RTA negotiations  
SME Masterplan 
2012-20 Aiming at creating globally competitive SMEs. The Masterplan proposed an Action Plan to 
address challenges to SMEs. The Action Plan comprises six High Impact Programmes, 
and other complementary initiatives.  
Source:  11th MP. Viewed at:  http://epu.gov.my/en/rmk/eleventh -malaysia -plan-2016-2020 [08/06/2017] ; 
and information provided by the authorities.  
2.2.3   Trade laws and regulations  
2.19.   A number of laws and regulations have  been amended or promulgated since 2014. In 
August 2015, the Malaysian Aviation Commission Act was promulgated. It came into force on 
1 March  2016. The Malaysian Aviation Commission (MAVCOM) was established on the same day , 
pursuant to the Malaysian Aviation Commission Act, to regulate economic and commercial matters 
related to civil aviation in Malaysia.8  
2.20.   The Companies Act 2016 (Act 777) was approved in 2016. The Companies Commission of 
Malaysia (CCM) is the main agency re sponsible for its implementation. The Act simplified the 
procedure to start a company. It applies a "no par value" regime, where companies are no longer 
required to state their authorized share capital, and a flat -rate fee is applied for incorporation (as 
opposed to ad valorem  incorporation fees). It also contains several deregulatory measures to 
reduce the cost of doing business. In particular, it introduced new provisions to reform corporate 
insolvency provisions in the form of corporate rescue mechanisms : judicial management and 
corporate voluntary arrangement. According to PEMUDAH's annual report, the Focus Group on 
Resolving Insolvency helps  raise public awareness of the new provisions and facilitat e their smooth 
implementation.9  
2.21.   Other legislative chan ges include : the Gas Supply (Amendment) Act 2016, which came into 
effect in January 2016 ; various amendments to the Food Regulations 1985 to, inter alia , 
harmonize with the Codex standard,  and regulate the sale of alcoholic beverages; the amendment 
to the Malaysian Biofuel Industry Regulation 2014, to reduce dependency on fossil fuel s for a 
greener environment and expand palm oil usage; and the implementation of the Import Legality 
Regulation under the Timber Legality Assurance System, to ensure all importe d timber is from 
legal sources.  
2.3  Trade Agreements and Arrangements  
2.3.1   WTO  
2.22.   Malaysia is an active Member of the WTO, and grants at least MFN treatment to all trading 
partners. Malaysia is an observer to the plurilateral Government Procurement Agreement (GPA). 
Under the GATS, Malaysia made commitments in nine of the twelve sectors, and it is a signatory to 
the GATS protocols on telecommunications (Fourth Protocol) and financial services (Fifth 
Protocol).10 It ratified the Protocol Amending the TRIPS Agreement in De cember 2015.  
2.23.   In May 2015, Malaysia became the fifth Member to ratify the Trade Facilitation Agreement; 
before that, in July 2014 , it notified the Preparatory Committee that Malaysia had designated all 
provisions under Category A, except Article 7.8 (Expedi ted Shipments) and Article 11.9 (Advance 
filing and processing of transit documentation and data prior to the arrival of goods).11  
                                                
8 MAVCOM online information. Viewed at: http://www.mavcom.my/en/who -we-are/ [31/05/17].  
9 PEMUDAH (2016), Annual Report 2015.  Viewed at: http://www.mpc.gov.my/pemudah/wp -
content/uploads/sites/21/2017/01/PEMUDAH -Annual_Report -2015.pdf  [23/05/ 17]. 
10 WTO documents GATS/SC/52/Suppl.2, 11 April 1997; and GATS/SC/52/Suppl.3, 26 February 1998.  
11 WTO document WT/PCTF/N/MYS/1, 23 July 2014.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  2.24.   In WTO negotiations, Malaysia is a member of the following groups: Asian Developing 
Members, APEC, ASEAN, and the Cairns Group.12 Malaysia is a participant in the WTO Information 
Technology Agreement (ITA). As a result of the negotiations, about 88% of IT product  tariff lines 
were eliminated on 1 July 2016 while the remainder  will be completely phased  out by July 2023.13 
2.25.   Malays ia is finalizing the details of its preferential treatment for LDCs' services providers in 
accordance with the 2013 Ministerial Declaration (Bali Package). It continues to participate in the 
discussion to find a solution on public stockholdings for food se curity purposes  and develop a 
special safeguard mechanism.14 
2.26.   Between March 2014 and October 2017, Malaysia was not involved in any new WTO dispute 
settlement cases either as a complainant or respondent. It participated as a third party in: 
a. the Australia – Tobacco Plain Packaging complaint raised by Ukraine (DS434), Honduras 
(DS435), Dominican Republic (DS441), Cuba (DS458), and Indonesia (DS467);  
b. the EU – Fatty Alcohols complaint by Indonesia (DS442);  
c. the India – Solar Cells complaint by the United States (D S456); and  
d. the EU – Biodiesel  complaint by Argentina (DS473).  
2.27.   Malaysia has submitted notifications to the WTO in a number of areas ( Table 2.2). It 
submitted its MFN tariffs for 2016 and 2017 to the IDB, as well as its import data for 2015 and 
2016. However, as at May 2017, notifications were outstanding in the areas of: agriculture 
(domestic support); quantitative restrictions; and customs valuati on. It has not notified "any new, 
or any changes to existing laws, regulations or administrative guidelines which significantly affect 
trade in services", which it is obliged to notify under Article III:3 of the GATS.  
Table 2.2 WTO notifications, 1 November 2013 to 10 November 2017  
Agreement  Requirement/content  Periodicity  WTO document and date (latest 
document if recurrent)  
Agreement on Agriculture  
Articles 10 & 
18.2 Tables ES:1 and ES:2 - 
Export subsidies  Annual  G/AG/N/MYS/30, 14 February 2014  
G/AG/N/MYS/35, 18 September 2015  
G/AG/N/MYS/36, 5 April 2016  
Article 18.2  Tables DS:1 and DS:2 – 
Domestic support  Annual  G/AG/N/MYS/32, 23 July 2014  
Article 18.2  Table MA:2 – imports 
under tariff quotas  Annual  G/AG/N/MYS/39, 13 July 2017  
G/AG/N/MYS/34/Corr.1, 28 September 2015  
G/AG/N/MYS/34, 27 March 2015  
Articles 5.7 
and 18.2  Table MA.5 – Special 
safeguard  Annual  G/AG/N/MYS/38, 4 July 2017  
G/AG/N/MYS/37, 5 October 2016  
G/AG/N/MYA/33, 24 March 2015  
G/AG/N/MYA/31, 16 July 2014  
GATS  
Article III:4 
and/or IV:2  Enquiry point  Ad hoc  S/ENQ/78/Rev.16, 22 April 2016  
Article V:7(a)  Regional trade agreements  Ad hoc  S/C/N/822, 24 August 2015  
Agreement on Implementation of Article VI of the GATT 1994 (Anti -dumping)  
Article 16.4  Semi-annual reports of 
anti-dumping actions 
(taken within the 
preceding six  months)  Semi-annual  G/ADP/N/300/MYS, 6 September 2017  
G/ADP/N/294/MYS, 8 March 2017  
G/ADP/N/286/MYS, 31 August 2016  
G/ADP/N/280/MYS, 10 March 2016  
G/ADP/N/272/MYS, 31 August 2015  
G/ADP/N/265/MYS, 15 April 2015  
                                                
12 WTO online information . Viewed at: 
https://www.wto.org/english/thewto_e/countries_e/malaysia_e.htm  [02/05/2017].  
13 European Commission (2016), The Expansion of the Information Technology Agreement: An 
Economic Assessment . Viewed at:  http://trade.ec.europa.eu/doclib/docs/2016/april/tradoc_154430.pdf  
[13/10/2017] . 
14 APEC (2016), IAP update for Malaysia 2014 -2016. Viewed at: http://www.apec.org/About -Us/About -
APEC/Achievements%20and%20Benefits/2016 -Bogor -Goals  [12/05/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Agreement  Requirement/content  Periodicity  WTO document and date (latest 
document if recurrent)  
G/ADP/N/259/MYS, 10 October 2014  
G/ADP/N/252/MYS, 23 January 2014  
G/ADP/N/244/MYS/Rev.1, 19 November 
2013 
Agreement Implementation of Article XXIV:7(a) of the GATT 1994 (Free trade areas)  
Article XXIV of 
the 
GATT  1994  Free trade agreement 
between Malaysia and 
Turkey  Ad hoc  WT/REG379/N/1, 21 February 2017  
Agreement on Rules of Origin  
Paragraph 4 
of Annex II  Preferential rules of origin 
under the FTA between 
Turkey and Malaysia  Ad hoc  G/RO/N/156, 21 July 2017  
 
Understanding on the Interpretation of Article XVII of the GATT 1994 (State trading)  
Article 
XVII:4(a)  State -trading activities  Annual  G/STR/N/16/MYS, 17 October 2016  
G/STR/N/15/MYS, 29 October 2014  
Agreement on Import Licensing Procedures  
Articles 5.1, 
5.2, 5.3  Notification of an 
automatic import licensing 
programme  Ad hoc  G/LIC/N/2/MYS/8, 18 August 2017  
G/LIC/N/2/MYS/7, 23 September 2016  
G/LIC/N/2/MYS/6, 23 January 2014  
Article 7.3  Replies to questionnaire on 
import  licensing 
procedures  Annual  G/LIC/N/3/MYS/12, 5 December 2016  
G/LIC/N/3/MYS/11, 10 March 2016  
G/LIC/N/3/MYS/10, 6 November 2014  
G/LIC/N/3/MYS/9, 24 January 2014  
G/LIC/N/3/MYS/8, 23 January 2014  
Agreement on Safeguards  
Article 12.1(a)  Initiation of investigations  Ad hoc  G/SG/N/6/MYS/5, 2 June 2016  
G/SG/N/6/MYS/4, 2 June 2016  
G/SG/N/6/MYS/3, 14 September 2015  
G/SG/N/6/MYS/2, 18 August 2014  
Article 12.1(b) 
and 12.1(c)  Findings, decisions  Ad hoc  G/SG/N/8/MYS/3/Suppl.1, 
G/SG/N/10/MYS/3/Suppl.1, 
G/SG/N/111/MYS/3/Suppl.1, 18 May 2017  
G/SG/N/8/MYS/3, G/SG/N/10/MYS/3,  21 
April 2017  
G/SG/N/8/MYS/2/Suppl.1, 
G/SG/N/10/MYS/2/Suppl.1, 
G/SG/N/111/MYS/2/Suppl.1, 18 May 
2017G/SG/N/8/MYS/2, G/SG/N/10/MYS/2,  
21 April 2017  
G/SG/N/8/MYS/1, G/SG/N/10/MYS/1, 
G/SG/ N/11/MYS/1/Suppl.1, 1 July 2015  
Article 12.4  Proposed provisional 
safeguard measure, 
footnotes  Ad hoc  G/SG/N/7/MYS/3, G/SG/N/11/MYS/3,  29 
September 2016  
G/SG/N/7/MYS/2, G/SG/N/11/MYS/2,  29 
September 2016  
G/SG/N/7/MYS/1, G/SG/N/11/MYS/1,  12 
December 2014  
Article 9.1  Footnote 2  Ad hoc  G/SG/N/8/MYS/1, G/SG/N/10/MYS/1, 
G/SG/N/11/MYS/1/Suppl.1, 1 July 2015  
Decision of 
the 
Committee on 
Safeguards  Termination  Ad hoc  G/SG/N/9/MYS/2, 19 January 2016  
Agreement on the Application of Sanitary and Phytosanitary Measures  
Article 7 and 
Annex B  Laws, regulations and 
emergency measures  Ad hoc  G/SPS/N/MYS/40, 1 August 2017  
G/SPS/N/MYS/39, 24 February 2017  
G/SPS/N/MYS/38, 8 February 2017  
G/SPS/N/MYS/37, 1 Sept 2015  
G/SPS/N/MYS/36, 1 April 2015  
G/SPS/N/MYS/35, 17 March  2015 
G/SPS/N/MYS/34, 17 March 2015  
G/SPS/N/MYS/33, 2 October 2014  
G/SPS/N/MYS/32, 11 August 2014  
G/SPS/N/MYS/31, 6 May 2014  
G/SPS/N/MYS/30, 6 May 2014  
G/SPS/N/MYS/29, 6 May 2014  
G/SPS/N/MYS/28, 6 May 2014  
G/SPS/N/MYS/27, 10 March 2014  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Agreement  Requirement/content  Periodicity  WTO document and date (latest 
document if recurrent)  
Agreement on Subsid ies and Countervailing Measures  
Article 25.1  Article XVI:1 of the GATT 
1994 and Article 25 of the 
SCM Agreement  Full 
notification 
every three 
years; annual 
updating  G/SCM/N/315/MYS, 9 October 2017  
G/SCM/N/284/MYS, 9 October 2017  
G/SCM/N/253/MYS, 28 Nov 2014 
 
Agreement on Technical Barriers to Trade  
Articles 2.9, 
2.10, and 5.6  Proposed and adopted 
technical regulations  Ad hoc  2017: G/TBT/N/MYS/72 -77 
2016: G/TBT/N/MYS/64 -71 
2015: G/TBT/N/MYS/53 -63 
G/TBT/N/MYS/15/Rev.3  
2014: G/TBT/N/MYS/37 -52, 
G/TBT/N/MYS/15/Rev.2,  
G/TBT/N/MYS/36/Rev.1  
Agreement on Trade Facilitation  
WT/L/911 
superseded by 
WT/L/931  Notification of Category A 
commitments  Ad hoc  WT/PCTF/N/MYS/1, 23 July 2014  
Source:  WTO Secretariat.  
2.3.2   Regional and preferential agreements  
2.3.2.1   ASEAN  
2.28.   Malaysia is a member of the Association of South East Asian Nations (ASEAN), which has 
component agreements on goods (ASEAN Trade in Goods Agreement – ATIGA), services (ASEAN 
Framework Agreement on Services – AFAS), and invest ment (ASEAN Comprehensive Investment 
Agreement – ACIA). On 31 December 2015, the first phase of the ASEAN Economic Community 
(AEC) Blueprint 2015 was completed. The authorities stated that, through the progressive 
reduction in barriers to trade and investm ent, ASEAN is now offering an integrated market, closely  
linked economy, improved business environment , and enhanced connectivity. The AEC Blueprint 
also led to the narrowing of the development gap and the promotion of equitable development in 
the region. Under the AEC 2015, intra -ASEAN import tariffs have been virtually eliminated and 
formal restrictions in the services sector gradually removed.  
2.29.   In November 2015, ASEAN leaders adopted the AEC Blueprint 2025 to create a highly 
integrated , cohesive, competit ive and dynamic ASEAN. The focus of the AEC 2025 Blueprint is on 
innovation, promoting growth through raising productivity and working towards further reducing 
the development gap within the region. ASEAN leaders reaffirmed their commitment in two areas: 
internal integration and global economic engagement.  
2.30.   Internal integration is to be achieved through enhancing trade facilitation, among others. An 
ASEAN Trade Facilitation Joint Consultative Committee (ATF – JCC) comprising representatives 
from the public a nd private sectors was established to accelerate work on trade facilitation and to 
implement mechanisms such as:  
a. ASEAN Single Window for customs clearance;  
b. ASEAN Self -Certification System: to be implemented by 2018, allowing Certified 
Exporters (CEs) to ma ke export declarations with invoices; they will no longer be 
required to apply for ATIGA Form D, as the invoice declaration will enable their goods to 
benefit from preferential tariff concession s under ATIGA;  
c. ASEAN Trade Repository to document trade, custo ms law and procedures;  
d. ASEAN Solutions for Investments, Services and Trade (ASSIST), a consultative 
mechanism for expedited and effective resolution of problems encountered by ASEAN -
based enterprises on issues related to AEC implementation;  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  e. ASEAN Tariff Fi nder, a free online search tool to help businesses (especially MSMEs) to 
obtain information on the preferential tariffs under ATIGA, as well as other tariff -related 
information including rules of origin;  
f. ASEAN Customs Transit System (ACTS) to facilitate th e movement of transit goods by 
road within ASEAN through computerization and online management of enquiries; and  
g. the harmonization of standards and technical regulations within ASEAN.  
2.31.   Efforts by ASEAN leaders to improve internal integration also  involve : 
a. reducing trade and investment barriers, especially those often referred to as "behind -
the-border measures" as well as burdensome regulatory procedures;  
b. enhancing connectivity with the implementation of the 2025 ASEAN Master Plan on 
Connectivity; and  
c. conduc ting active consultation and engagement with the private sector and other 
stakeholders.  
2.32.   As regards  further strengthening ASEAN's global economic engagement, the authorities 
consider that one of the immediate priorities is to complete negotiations on the Re gional 
Comprehensive Economic Partnership (RCEP) Agreement between ASEAN and six RTA partners 
(Australia, China, India, Japan, Republic of Korea, and New Zealand).15 The authorities stated that 
early implementation of the RCEP will enable the business secto r to tap into the huge potential of 
the 16 countries, which at the same time will contribute to global economic growth.  
2.33.   The AEC 2025 Consolidated Strategic Action Plan (CSAP) was endorsed by the ASEAN 
Economic Ministers and the ASEAN Economic Community (A EC) Council Ministers on 
6 February  2017. The AEC 2025 CSAP complements the AEC 2025 Blueprint, by serving as a single 
reference document for the public to inform stakeholders of the key actions to be implemented 
under the ASEAN economic integration agenda  from 2016 to 2025, and by allowing for more 
structured tracking and reporting of the implementation process.  
2.34.   As part of ASEAN, Malaysia is a signatory to RTAs with Australia and New Zealand, China, 
India, Japan, and the Republic of Korea. During the revi ew period, the ASEAN – India Agreement 
was expanded to cover trade in services ( Table 2.3). The FTA between ASEAN and Hong Kong, 
China was concluded, and expected to b e signed soon. Malaysia also has bilateral RTAs with: 
Australia, Chile, India, Japan, New Zealand, Pakistan, and Turkey. The Malaysia – Turkey FTA 
(MTFTA) entered into force in 2015 ( Table 2.3). Malaysia is negotiating with the European Union 
and the EFTA.  
2.35.   Concerning TPP negotiations, the authorities stated that in light of the US withdrawal, 
Ministers from the remaining 11 members are considering next steps. Malaysia  will continue to 
engage with other TPP parties and decide the way forward after evaluating all the available 
options.  
2.3.2.2   New RTAs  
2.36.   Two new RTAs entered into force during the review period: ASEAN – India Free Trade 
Agreement, and Malaysia – Turkey Free Trade A greement ( Table 2.3).  
                                                
15 ASEAN online information. Viewed at: http://asean.org/?static_post=rcep -regional -comprehensive -
economic -partnership%20  [11/05/2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 2.3 Main features of new RTAs, 2014 -17 
ASEAN RTA  
ASEAN – India Free Trade Agreement  
Date of signature  13/08/2009 (goods)  
13/11/2014 (services)  
Entry into force  01/01/2010 (goods)  
01/07/2015 (services)  
End of implementation period  2024 
Coverage (selected features)  Goods and services  
Malaysia's merchandise trade 
with India (2016)  2.4%  of total imports; 4.1% of total exports  
WTO consideration status  Factual presentation distributed (Goods: 2017; services: 2016)  
WTO document series  WT/COMTD/RTA/8/1 , 14 December 2016; and WT/REG372/1, 22 
August 2016  
BILATERAL RTA   
Malaysia -Turkey Free Trade Agreement (MTFTA)  
Date of signature  17/04/2014  
Entry into force  01/08/2015  
End of implementation period  2023  
Coverage (selected features)  Goods  
Malaysia's merchandise trade 
with Turkey (2016)  0.2% of total imports; 0.9% of total exports  
WTO consideration status  Factual presentation not distributed  
WTO document series  WT/REG379/N/1, 21 February 2017  
Source:  WTO Secretariat, based on RTA Information System . Viewed at:  http://rtais.wto.org/ .  
2.37.   The Agreement between ASEAN and India on goods entered into force in 2010, while that 
on services entered into force in 2015. Regarding goods, key imports  to Malaysia from India were  
chemicals and minerals, which along with base metals and vegetables accounted  for about 65% of 
Malaysia's imports from India.16 Machinery and minerals were important exports from Malaysia to 
India. Parties will reduce or eliminate tariffs under normal tracks ( normal track 1 and 2), a 
sensitive track, a special products list (only fo r India), a highly sensitive list, and an exclusion list:  
a. normal track 1: Malaysia's tariffs under normal track 1 were reduced and eventually 
eliminated by the end of 2013;  
b. normal track 2: Malaysia's tariffs were reduced and eventually eliminated by the en d of 
2016;  
c. sensitive track: tariff rates above 5% were reduced to 5% by the end of 2016; for the 
remaining products subject to 5% duty, the rate was reduced to 4.5% when the 
Agreement entered into force; applied MFN tariff rates on 4% of the tariff lines i n the 
sensitive track are to be eliminated by the end of 2019;  
d. highly sensitive list: tariff reduction as scheduled in Annex I of the Agreement;  and 
e. exclusion list: annual tariff review, which has not happened in practice yet.  
2.38.   At the end of the transition period (2019), 1,818 tariff lines (17.5% of total lines in the tariff 
schedule) will remain dutiable ( Table 2.4), with an average final tariff rate of 13.3%.17 The tari ff 
lines that will remain subject to duty once the Agreement is fully implemented include: plastics 
and rubber; base metals; chemical products; textiles and clothing; and vehicles.  
                                                
16 WTO document, WT/COMTD/RTA/8/1, 14 December 2016.  
17 WTO document, WT/COMTD/RTA/8/1, 14 December 2016.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 2.4 ASEAN – India: Ma laysia's tariff elimination and reduction commitments  
Duty phase -out 
period  Duty liberalization  Duty reduction  
Number of 
lines  % of total lines in the 
tariff schedule  Number of 
lines  % of total lines in the 
tariff schedule  
MFN duty free 
(2010)  6,625  63.8   
01-Jan-10 18 0.2 2,541  24.5 
01-Jan-11   57 0.5 
01-Jan-12   35 0.3 
01-Jan-13 444 4.3 70 0.7 
31-Dec-13 597 5.7 1 0.0 
01-Jan-14   3 0.0 
01-Jan-15   23 0.2 
01-Jan-16     13 0.1 
31-Dec-16 887 8.5   
31-Dec-19   11 26.6 
Remain dutiable  1,818  17.5   
Total  10,389  100.0  2,754  52.8 
Source:  Factual Presentation: Free Trade Agreement between the ASEAN and India (Goods), report by the 
Secretariat, WT/COMTD/RTA/8/1, 14 December 2016.  
2.39.   Malaysia's services schedule under this Agreement contains horizontal restrictions on: 
commercial presence in relation to acquisition, mergers and takeovers (limitations on market 
access); land -property and real estate; and incentives/preferences (limitati ons on national 
treatment). Horizontal commitments under Mode 4 are identical to those under the GATS, covering 
intra-corporate transferees, and others (including specialists; professionals with academic 
credentials, professional qualifications, experience  and/or expertise; and business visitors).  
2.40.   Regarding  sector -specific commitments, comparing to its GATS commitments, Malaysia 
made improvements in, inter alia , computer and related services; construction and related 
engineering services; professional servi ces; telecommunications services; and audiovisual 
services. It did not reproduce some of the specific commitments made under the GATS in: 
rental/leasing services without operators; some (other) business services; the whole financial 
sector; entertainment s ervices; sporting and other recreational services; and some maritime 
transport services. Partial commitments were made in sectors and/or sub -sectors for which 
Malaysia has no GATS commitments, such as higher education services, and road transport 
services.   
2.41.   Under the Free Trade Agreement between Malaysia and Turkey, which entered into force in 
2015, parties agreed that for originating goods under:18 
a. fast track: tariffs were to be eliminated on the date of entry into force of the FTA;  
b. normal track: tariffs we re to be  reduced and ultimately eliminated in four equal annual 
stages beginning on the date of entry into force of the FTA;  
c. sensitive track: tariffs were to be reduced and ultimately eliminated in six equal annual 
stages beginning on the date of entry int o force of the FTA;  
d. highly sensitive track: tariffs were to be reduced and ultimately eliminated in nine equal 
annual stages beginning on the date of entry into force of the FTA;  
e. standstill: tariffs were to remain at the Base Rates;  
f. exclusion list: no obli gation relating to tariffs;  
g. reduced duty: tariffs were to be reduced from the Base Rate to the mutually agreed 
reduced duty on the date of entry into force of the FTA;  
                                                
18 MITI online information . Viewed at : http://fta.miti.gov.my/miti -fta/resources/Malaysia%20 -
%20Turkey/MTFTA_Main_Agreement.pdf  [11/05/2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  h. tariff quota: tariff quotas are set out in Appendix 3 -B-1 and 3 -B-2 of the FTA.  
2.42.   Current ly, provisions in the MTFTA regulate trade in goods between Malaysia and Turkey. Its 
evolutionary clause stipulated that both parties agree d to begin negotiations in trade in services, 
and exploratory talks on investment, one year after the entry into forc e of the MTFTA.19 The 
authorities indicated that these negotiations have not yet begun.  
2.3.3   PTAs  
2.43.   Malaysia receives GSP (Generalized System of Preferences) treatment from Japan (for 
76 tariff lines), Norway, the Russian Federation, Belarus, and Switzerland.   
2.3.4   Other agreements and arrangements  
2.44.   Malaysia is a signatory to the Global System of Trade Preference s (GSTP) among Developing 
Countries, and grants a 10% preferential tariff for certain woven fabrics made of man -made 
fibres.20  
2.45.   By the end of 2016, 40 countrie s had signed (among which, 31 ratified) the Framework 
Agreement on the Trade Preferential System of the Organization of the Islamic Conference 
(TPS-OIC).  The Agreement entered into force in 2003, although it has not been operational. Under 
the TPS -OIC, 31 countries signed  (among which , 18 ratified) the Protocol on the Preferential 
Tariffs Scheme, which entered into force in 2010; and 30 countries signed (am ong which , 18 
ratified) the Rules of Origin, which entered into force in 2011.   
2.46.   Malaysia also signed the Developing Eight Preferential Tariff Arrangement (D8 -PTA), 
together with Bangladesh, Egypt, Indonesia, Iran, Nigeria, Pakistan, and Turkey. Malaysia lowered  
its tariffs under the D8 -PTA from 2013 to 2016 ( Section 3.1).  
2.47.   As an APEC member, Malaysia has:  
a. fulfilled the commitments to eliminate or reduce import tariffs to 5% on the 54 products 
under the APEC Environmental Goods List 2012, which came into ef fect on 
1 January  2016;  
b. co-led the project with the Philippines to integrate SME automotive suppliers into OEM  
(original equipment manufacturer)  global value chains, and the GVC -SME Automotive 
Sector project which is a multi -year and 2 -phase project to be completed in 2019;  
c. participat ed in the Core Drafting Group on the Collective Strategic Study on the Free 
Trade Area of the Asia -Pacific (FTAAP);  
d. contributed to the APEC Services Competitiveness Roadmap (2016 -2025), and 
undert aken discussions on the 14 APEC -wide actions identified under the Roadmap;  and 
e. contributed to the APEC SME O2O Initiative, which intends to facilitate the growth of 
SMEs through online -to-offline business models.  
2.4  Investment Regime  
2.4.1   Overview  
2.48.   According to the World Bank's Doing Business re port, Malaysia ranked 23rd among 
190 economies in the world in 2017 in overall terms of the ease of doing business (22nd among 
189 economies in 2016).21 During the review period, Malaysia made starting a business less costly 
                                                
19 WT/REG379/N/1,  21 February 2017.  
20 WTO online information . Viewed at: http://rtais.wto.org/UI/PublicShowRTAIDCard.aspx?rtaid=146  
[11/05/17].  
21 World Bank (2017), Doing Business 2017 – Malaysia . Viewed at: 
http://www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/mys.pdf  [16/05/17]. WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  by reducing the company registra tion fees, but made it more difficult by requiring that companies 
with annual revenue of more than RM 500,000 register as GST payers ( Section 3.3.1). Its ranking 
in terms of the ease of starting a business dropped significantly from 59th in 2016 to 112th in 2017.  
2.49.   The World Economic Forum's (WEF) Global Competitiveness Report ranked Malaysia 25th out 
of 138 economies in 2016 -17, down from 18th out of 140 economies in 2015 -16.22 The authorities 
stated that, despite the slide, Malaysia continued to be the highe st ranked among developing Asian 
countries.23 Its ranking in the WEF's Global Enabling Trade report improved from 38th out of 
134 economies in 2014 to 37th out of 136 economies in 2016.24 The most problematic factors  
involved in  doing business in Malaysia, as identified in the Global Competitiveness Report, include: 
access to financing, corruption, and inefficient government bureaucracy.  
2.50.   Since the previous review in 2014, there has not been any significant change to the 
legislat ive and institutional framework governing investment. Both domestic and foreign 
investment in Malaysia continues to be regulated under the Promotion of Investment Act (PIA) 
1986, and the Industrial Co -ordination Act (ICA) 1975. The PIA sets out rules on co rporate income 
tax relief for the establishment and development in Malaysia of certain economic activities, as well 
as for the promotion of exports. The ICA aims at maintaining orderly development and growth in 
Malaysia's manufacturing sector, and requires  manufacturing companies of a certain size to be 
licensed.25 
2.51.   The principal agency for the promotion of the manufacturing and services sectors (excluding 
financial services and utilities) in Malaysia remains the Malaysian Investment Development 
Authority (MI DA), which was incorporated as a statutory body under the Malaysian Industrial 
Development Authority Act.26 MIDA evaluates applications for the following in relation to  projects 
in manufacturing and related services sectors: manufacturing licences; fiscal a nd non -fiscal 
incentives; expatriate posts; duty exemptions on raw materials and components; and duty 
exemptions on machinery and equipment for the agricultural sector and selected services sectors.  
2.52.   MIDA acts as a focal point to coordinate applications rel ated to investment projects through:  
a. a Taskforce on Investment, which streamlines programmes such as trade and 
investment missions, and collat es investment figures in the manufacturing and services 
sectors;  
b. a Business Information Centre, and a Customer Ser vice Centre, both of which were 
established to facilitate investors' enquiries relating to investment policies and 
procedures;  
c. an Advisory Services Centre, which stations representatives from government agencies 
such as Royal Malaysian Customs, Department of Immigration, Department of Labour, 
Telekom Malaysia Berhad, Tenaga Nasional Berhad, and Department of Environment, to 
assist investors;  
                                                                                                                                                  
In 2017, for the first time , the Doing  Business report collect ed data on Somalia, bringing the total number of 
economies covered to 190.  
22 World Economic Forum (2017), The Global Competitiveness Report 2016 -2017. Viewed at: 
http://www3.weforum.org/docs/GCR2016 -2017/05FullReport/TheGlobalCompetitivenessReport2016 -
2017_FINAL.pdf  [17/05/17].  
23 MIDA (2017), 2016 Malaysia Investment Performance Report . Viewed at: 
http://www.mida.g ov.my/home/administrator/system_files/modules/photo/uploads/20170414162927_MIDA -
FINAL%20MIPR2016%2022032017.pdf  [17/05/17].  
24 World Economic Forum (2016), The Global Enabling Trade Report 2016 . Viewed at: 
http://www3.weforum.org/docs/WEF_GETR_2016_report.pdf  [17/05/17].  
25 In accordance with the ICA, person(s) engaging in any manufacturing activity with shareholders' 
funds of RM2.5 million and above or employing 75 or more full -time paid e mployees must obtain a 
manufacturing licence. Manufacturing licences are issued automatically within seven days unless they relate to 
sensitive industries/activities: security, safety, health, environmental and religious considerations; projects 
proposed t o be located in Sabah or Sarawak; or projects requiring approval under the Petroleum Development 
Act. Responses to manufacturing licence applications in these sensitive areas should be provided within four 
weeks.  
26 MIDA online information. Viewed at: http://www.mida.gov.my/home/about -mida/posts/  [17/05/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  d. an Immigration Unit, set up in MIDA, which issues visas and work permits for expatriates 
and dependents in the manuf acturing and services sectors;  
e. one-stop centres set up at state/regional government level to facilitate project 
implementation by assist ing investors in obtaining licences, permits and approvals;  
f. investment promotion bodies at the federal and state levels,  and economic corridors; 
and 
g. online enquiries/information.  
2.53.   According to MIDA, Malaysia continued to adopt a more focused and targeted approach to 
attracting quality investment in high technology, capital -intensive and knowledge -intensive 
industries; high value added industries; R&D activities; and in new growth areas. In line with the 
11th MP, MIDA focuses on promoting niche and more complex products for the manufacturing 
sector. In addition, the 11th MP identified three catalyst subsectors (electrical and  electronic 
products, machinery and equipment, and chemicals) and two growth subsectors (aerospace and 
medical devices). MIDA facilitated the setting up of Industry Advisory Panels (IAPs) for these 
subsectors and pharmaceuticals. Focus in the services sect or is in the areas of principal hubs27, 
logistics, and the ecosystem surrounding e -commerce, green technology, renewable energy, and 
waste management.28  
2.54.   MIDA identified the following initiatives to improve  the business environment:  
a. fine-tuning investment policies, as well as continuing collaboration and engagement with 
industry players and stakeholders to attract investment;  
b. direct cooperation between MIDA and agencies at federal and state levels in securing 
infrastructure facilities, expediting approvals relating to building plans, and business 
licences, and "handholding" and assisting investors in obtaining all necessary approvals 
for projects until they are operational;  and 
c. collaboration with MITI, MOF and Customs to simplify the mechanism to grant impor t 
duty and/or sales tax exemption on machinery, equipment, spare parts, consumables, 
prime movers and container trailers.  
2.55.   The Government is moving towards a more facilitative role in boosting investment. One of 
the major reforms implemented in recent year s is the streamlining of the tax system. The sales 
and services tax (SST), which was charged at the manufacturing level only (not to the rest of the 
supply  chain), was abolished and replaced with a single tax – the goods and services tax (GST), 
which is ap plicable at all levels of the supply chain.29 The Government is also working to reduce 
the time and costs of procedures by establishing online portals, and simplifying processes in areas 
such as starting a business, registering properties, and paying taxes,  among others.  
2.56.   PEMUDAH, the public -private sector task force, continues to be responsible for identifying 
measures to improve the business environment in Malaysia. It launched the Business Licensing 
Electronic Support System (BLESS) in 2008, a virtual one -stop services centre that provides 
information and helps  companies apply for licences or permits to start operating businesses in 
Malaysia. The number of licence applications through BLESS increased more than threefold from 
25,047 in 2014 to 81,344 in 201 6. 
                                                
27 A principal hub is a locally incorporated company that uses Malaysia as a base for conducting its 
regional and global businesses and operations to manage, control and support its key functions inc luding 
management of risks, decision making, strategic business activities, trading, finance, management and human 
resources.   
28 MIDA (2017), 2016 Malaysia Investment Performance Report . Viewed at: 
http://www.mida.gov.my/home/administrator/system_files/mo dules/photo/uploads/20170414162927_MIDA -
FINAL%20MIPR2016%2022032017.pdf  [17/05/17].  
29 APEC (2016),  IAP update for Malaysia 2014 -2016. Viewed at:  http://w ww.apec.org/About -Us/About -
APEC/Achievements%20and%20Benefits/2016 -Bogor -Goals  [31/05/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
- 36 - 
 
  2.57.   The Government has been making efforts to modernize Malaysia's business licensing 
system. The authorities indicated that, to date , 799 licences at the federal level have been 
reviewed, among which 454 licences were streamlined and simplified, and 214 li cences were made 
accessible online through BLESS. The Malaysia Productivity Corporation (MPC) conducted sectoral 
regulatory review s to reduce unnecessary regulatory burdens on business. Areas being reviewed 
include: logistics, medical professionals, professional services to the construction industry, and 
construction. The MPC, in line with the Malaysia Productivity Blueprint launched in May 2017, has 
been tasked with reduc ing any non -tariff measures that impede business growth to improve the 
logistics sector.  
2.58.   The circular on the National Policy on the Development and Implementation of Regulations 
(NPDIR) was issued on 15 July 2013. Ac cording to this, all federal ministries and agencies are 
required to implement good regulatory practice (GRP) and undertake regulatory impact 
assessment (RIA) in developing new and amending regulations. This is to ensure that regulations 
are developed acco rding to best international practice in regulatory management.30  
2.59.   Malaysia has also been developing regional development hubs such as the Malaysian Vision 
Valley, and education business parks.  
2.4.2   Foreign investment regime  
2.60.   Malaysia's laws governing investment d o not provide general principles and rules for foreign 
participation in local businesses. Malaysian incorporated companies, whether locally or foreign -
owned, are eligible for incentives if they invest in promoted activities (Section 3).    
2.61.   The Government co ntinued to reduce foreign investment restrictions during the review 
period. Restrictions on quantity surveying services were lifted in January 2016, bringing to 45 the 
total number of services sub -sectors (such as medical services, education, and legal ser vices, 
among others) that have  had their foreign investment restrictions lifted  since 2009. Malaysia 
liberalized foreign equity restrictions on credit rating agencies in 2017, and unit trust management 
companies in 2014. Currently there is no foreign equit y restriction in the capital market ; according 
to the authorities, the 70% cap on investment banks was removed as well . 
2.62.   Restrictions on foreign investment in fisheries, energy, telecommunications, finance , and 
transport, remain.  For example, as at the time  of the previous review, foreign equity in power 
generation is allowed up to 49%, while for electricity distribution, only up to a 30% stake in a 
designated franchise is generally allowed. The Ministry of Transport set foreign equity ceilings for 
domestic airline companies at 49%, with the same ceiling permitted for convention and exhibition 
centres with a seating capacity below 5,000.31Foreign participation in public -private -partnership 
projects is in general limited to a maximum of 25% of its share capital . For projects of strategic 
and national importance, foreign ownership is required to  be widespread to ensure that no single 
foreign party has a dominant influence on the company.32  
2.63.   Some of Malaysia's policies supporting the ethnic Malay community (Bumiput era) may affect 
FDI. First, acquisitions of properties valued at RM 20 million or more from Bumiputeras  and 
government agencies by foreigners or local people must obtain approval from the Economic 
Planning Unit . Second,  foreign -owned companies and local co mpanies, with predominantly 
Malaysian -based operations that are seeking listing on the Malaysian Stock Exchange must 
allocate at least 12.5% of their public spread during initial public offering (enlarged issues and 
paid-up capital) to Bumiputera  investors  at the point of their listing. Third, f oreign -owned 
hypermarkets must maintain 30% of Bumiputera  equity; according to the authorities, this is to 
encourage local business partners to absorb knowledge and skills from foreign retailers.  
2.64.   As of July 2017, Ma laysia ha d signed 64 investment guarantee agreements (IGAs). All 
contain provisions for investor -state dispute settlement through arbitration using the rules under 
the International Centre for Settlement of Investment Disputes (ICSID), United Nations 
                                                
30 PEMUDAH (2017), Annual Report on Modernisation of Regulations 2016 . Viewed at: 
http://www.mpc.gov.my/wp -content/uploads/2016/12/ARMR -2016.pdf  [23/05/17].  
31 TPR Mal aysia 2014.  
32 TPR Malaysia 2014 . WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Commission on I nternational Trade Law (UNCITRAL), Kuala Lumpur Regional Centre for Arbitration 
(KLRCA), or other fora.  
2.65.   Malaysia has double  taxation agreements (DTAs) in force with 74 jurisdictions.  Since 2014, 
one DTA has been  signed (between Malaysia and the Slovak Rep ublic) . It entered into force on 
14 March 2016.  
 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3  TRADE POLICIES AND P RACTICES BY MEASURE  
3.1  Measures Directly Affecting Imports  
3.1.1   Customs procedures, valuation, and requirements  
3.1.  Customs procedures remain managed by the Royal Malaysian Custom s Department (RMCD) 
under the Customs Act 1967, and no significant changes have been made to its legislative or 
institutional framework since the previous trade policy review of Malaysia in 2014.  
3.2.  Customs procedures are automated: import declarations, duty  assessment, payment of 
duties, and customs release are submitted electronically. The issue of most import licences is 
paperless, and they can be submitted electronically with customs declarations.  However, to date, 
Customs has no facility to enable electr onic submission of other supporting documents (e.g. 
invoice, bill of lading) with the import/export declaration. In 2017, there were 59 authorized 
economic operators (AEOs) in Malaysia, up from 48 in 2014. Registered AEOs are encouraged to 
conduct electron ic transactions for better security management in the supply chain.1 For importers 
registered as AEOs, automatic release at Customs takes one minute.  
3.3.  In 2017, Malaysia stood at 60th in the ranking of 190 economies on the ease of trading 
across borders. To  import, it takes 72 hours and US$321 to conduct border compliance, and 
10 hours and US$60 to conduct documentary compliance ( Table 3.1). Documents required are: 
impor t declaration, commercial invoice, packing list, bill of lading, and certificate of origin. 
Importers file a declaration with Customs, while additional declarations are required for taxable 
goods valued over RM 20,000. Malaysia's rank was lower than that o f the Republic of Korea 
(32nd), Singapore (41st), Hong Kong, China (42nd), and Japan (49th), but higher than the 
regional average (East Asia and Pacific).2 
Table 3.1 Import time and cost, 2017  
Indicator  Malaysia  East Asia and Pacific  
Time to import: border compliance (hours)  72 71 
Cost to import: border compliance (US$)  321 436 
Time to import: documentary compliance (hours)  10 71 
Cost to import: documentary compliance (US$)  60 128 
Source:  World Bank (2017), Doing Business 2017 – Malaysia . Viewed at: 
http://www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/mys.pd f 
[12/06/17].  
3.4.  Malaysia ratified the WTO Trade Facilitation Agreement (TFA) in May 2015, and notified that 
it designated all provisions under Category A with some exceptions (Section 2.3.1). It is party to 
the World Customs Organization Revised Convention on the Simplification and Harmonization of 
Customs Procedure (Revised Kyoto Convention).  
3.5.  Malaysia ranked 37th out of 136 countries in the World Economic Forum's Enabling Trade 
Index in 2016, and 17th in its availability and quality of transport infrastruc ture sub -index.3 
According to the OECD trade facilitation indicators, as of 2015 (the latest year for which data are 
available), Malaysia performed better than the averages of Asian and upper -middle -income 
countries in the areas of fees and charges, harmon ization and simplification of documents, 
automation, streamlining of procedures, and governance and impartiality.4 Its performance for 
information availability and both internal and external border agency cooperation is below the 
averages of Asian and uppe r-middle -income countries.  
                                                
1 Malaysia International Trade Repository online information. Viewed at: 
http://mytraderepository.customs.gov.my/en/Pages/at_loat.aspx  [13/06/17].  
2 World Bank (2017), Doing Business 2017 – Malaysia . Viewed at: 
http://www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/mys.pdf  [12/06/17].  
3 World Economic Forum (2016), The Global Enabling Trade Report 2016 . Viewed at:  
http://www3.weforum.org/docs/WEF_GETR_2016_report.pdf  [12/06/17].  
4 OECD Trade Facilitation Indicators – Malaysia. Viewed at : 
http://www.oecd.org/tad /facilitation/Malaysia_OECD -Trade -Facilitation -Indicators.pdf  [13/06/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.6.  To facilitate trade, the Government: simplified document requirements for the issuance of 
landing permits for domestic charter flights; reduced unnecessary regulatory supply chain 
requirements for the processed food industry; re moved requirements from MAQIS (Malaysian 
Quarantine and Inspection Services) for the issuance of import and export permits for agricultural 
products, including processed food; established the National Single Window, the Malaysian 
National Trade Repository portal, and the ASEAN Trade Repository Portal. In addition, the 
authorities stated that other major trade facilitation initiatives include:  
a. setting up a Trade Facilitation Cluster Working Group as the national trade facilitation 
committee, to coordinate a nd monitor trade facilitation efforts so as to ensure 
compliance with the WTO's TFA;  
b. revival of the ASEAN Trade Facilitation Joint Consultative Committee to conduct trade 
facilitation reforms with the aim of strengthening cooperation, reducing transaction 
costs, and promoting efficient trade among ASEAN members;  
c. implementing the ASEAN Single Window, which is a regional initiative connecting and 
integrating national single windows by enabling the electronic exchange of cross border 
documents among ASEAN memb ers; and  
d. Pilot testing the ASEAN -wide Self -Certification Scheme, which is to be realized by 2018 
(Section 2.3.2.1).  
3.7.  To date, smuggling remains a concern, despite the value of seized items decreasing by 38% 
from 2014 to 2016 reflecting enhanced enforcement initiatives to mitigate this problem. In 2016, 
the value of seized merchandise was RM 446.9 million, equivalent to 0.26% of total merchandise 
imports. Major items included drugs, cigarettes, vehicles, alcoholic beverages, and firecrackers.  
3.8.  Complaints again st customs decisions may be made to the Director General of Customs, and 
appeals may be lodged with the Customs Appeal Tribunal, the Minister of Finance, and the High 
Court. To date, 118 cases have been lodged with the Customs Appeal Tribunal, among which,  
25 were lodged after 2014.5  
3.9.  Customs valuation is based on the Customs (Rules of Valuation) Regulations 1999, amended 
in 2000, and is largely determined in accordance with the WTO Agreement on Customs Valuation. 
Transaction value based on the c.i.f. price  is used for most imports. If this method cannot be used, 
valuation is based on the transaction value of identical or similar goods, the deductive value, the 
computed value or flexible valuation.6 The Minister of Finance approves the minimum value of 
goods  recommended by the Customs Valuation Management Section.  Regarding the valuation of 
passenger cars and motorcycles, Customs is reviewing its practices to adopt the transaction value 
method.  
3.1.2   Rules of origin  
3.10.   Malaysia has no national law governing rules of origin for imports, and it does not maintain 
any non -preferential  rules of origin. Preferential rules apply to imports under preferential trading 
arrangements and FTAs ( Sections 3.1.3.3 and 2.3.2), and are generally based on two criteria:  
a. Wholly obtained o r produced, for natural products;  and 
b. Substantial transformation: comprising the value added method, the change in tariff 
classification at HS 2 -digit, 4 -digit or 6 -digit levels, specified process of manufacture 
involving products such as textiles and chem icals, or a combination of the above.  
                                                
5 Details of the appeal cases are available online at: 
http://tribunalkastam.treasury.go v.my/index.php/en/ringkasan -keputusan -rayuan  [28 /09/17].  
6 Customs (Rules of Valuation) Regulations. Viewed at: 
http://www.customs.gov.my/en/pg/Pages/pg_act.aspx  [13/06/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.1.3   Tariffs  
3.11.   As part of the national budget process, Malaysia's tariff schedule is reviewed annually. 
Regular reviews of the tariff structure and tariff rates are held through dialogues between the 
authorities and the business community.  
3.12.   Malaysia's implementation of its Uruguay Round tariff binding was achieved in 2005. As 
during the previous review perio d, about 20% of its tariff lines are unbound, and the simple 
average bound rate is 11.0% for agricultural products (WTO definition) and 16.5% for 
non-agricultural products. Malaysia's bound tariffs are in HS 02 nomenclature.7 
3.1.3.1   Applied MFN tariff  
3.13.   In 2017, Ma laysia's tariff schedule is based on HS 2017 nomenclature, comprising 
11,690  lines at the 10 -digit level. Almost all rates (99%) are ad valorem ; duty -free lines account 
for 56.2% of all tariff lines, while ad valorem  rates higher than 0% account for 42.8% (Table 3.2). 
Among the 116 tariff lines with non -ad valorem  rates, 64 lines carry specific rates, 50 lines carry 
compound rates, and 2 lines carry alternate rates.  
Table 3.2 Malaysia's tariff structure, 2013 and 2017  
MFN applied  2013  2017  
Simple average rate (%)  5.6 7.5 
HS 01 -24 2.5 2.7 
HS 25 -97 6.2 8.3 
WTO agricultural products  2.9 3.3 
WTO non -agricultural products  6.0 8.0 
Duty-free tariff lines (% of all tariff lines)  64.6 56.2 
Simple average of dutiable lines only  15.9 17.2 
Tariff quotas (% of all tariff lines)  0.2 0.2 
Non-ad valorem  tariffs (% of all tariff lines)  0.9 1.0 
Domestic tariff "peaks" (% of all tariff lines)a 16.8 13.9 
International tariff "peaks" (% of all tariff lines)b 16.8 20.7 
Nuisance applied rates (% of all tariff lines)c 0.1 0.03 
Standard deviation  9.5 10.9 
Total number of tariff lines  9,417  11,690  
Ad valorem  rates (> than 0%)  3,255  5,001  
Duty-free rates  6,079  6,573  
Specific rates  41 64 
Compound rates  40 50 
Alternate rates  2 2 
a Domestic tariff peaks are defined as those exceeding three times the overall simple average applied 
rate. 
b International tariff peaks are defined as those exceeding 15%.  
c Nuisance rates are those greater than zero, but less than or equal to 2%.  
Note:  Calculations exclude in -quota rates and specific rates and include the ad valorem part of compound 
and alternate rates. The 2013 tariff is based on HS  12 and the 2017 tariff is based on HS  17 
nomenclature.  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
3.14.   The simple average applied MFN rate went up from 5.6% in 2013 to 7.5% in 2017; it went 
up for both agricultural  (WTO defin ition) and non -agricultural products, from 2.9% to 3.3%, and 
from 6% to 8%, respectively. These changes reflect both the nomenclature change, and changes 
in the tariff structure as a large number of duty -free lines were merged into other tariff lines 
during the tariff transposition process (from HS  2012 to HS  2017) ( Table A3. 1, and Chart 3.1). In 
particular:  
                                                
7 For details o f tariff bindings, see WTO document WT/TPR/S/292/Rev.2, 8 April 2014.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   the number of tariff lines under chapter 44 (wood and articles of wood) was reduced from 
1,477 in 2013, to 405 in 2017, and the simple average rate of tariffs for these products rose 
from 1.1% to 4.3%; and  
 the number of tariff l ines under chapter 87 (vehicles and parts thereof) was increased from 
356 in 2013, to 1,245 in 2017, and the simple average tariff rate for these lines went up 
from 19.9% to 23%.  
Chart 3.1 Average applied MFN tariff rates, by HS section, 2013 and 2017  
 
Note:  2013 tariff is based on HS12 nomenclature; 2017 tariff is based on HS17. Calculations exclude 
in-quota and specific rates and include the ad valorem  part of compound and alternate rates.  
Source:  WTO Secretariat calculations, based on online data provided by the authorities.  
3.15.   The number of different tariff rates changed from 19 in 2013 to 25 in 2017. Ad valorem  
tariff rates range from zero to 60% (ceramic glazed wall tiles) for industrial products and 90% 
(round cabbage) for agricultural products ( Chart 3.2). Rates of over 30% now apply to 0.9% of 
tariff items (up from 0.6% in 2013). Average tariffs are highest  for transport equipment (simple 
average tariff rate of 21.5% in 2017), and articles of stone (17.8%) (Chart 3.1).  
0%5%10%15%20%25%
010203040506070809101112131415161718192021TotalChart 3. Average applied MFN tariff rates, by HS section, 2013 and 2017
01   Live animals & products        
02   Vegetable products
03   Fats & oils      
04   Prepared food, beverages
05   Mineral products
06   Chemicals & products07   Plastic & rubber
08   Hides & skins
09   Wood & articles
10   Pulp, paper, etc.
11   Textiles & articles
12   Footwear, headgear13   Articles of stones
14   Precious stones, etc.
15   Base metals & products
16   Machinery
17   Transport equipment
18   Precision instrument19   Arms & ammunition
20   Miscellaneous manufacturing
21   Works of art, etc.MFN 2017
Note:  2013 tariff is based on HS12 nomenclature; 2017 tariff is based on HS17.  Excluding in -quota and specific rates.   
Including the ad valorem part of compound and alternate rate.
Source:  WTO Secretariat calculations, based on online data provided by the authorities.MFN 2013WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Chart 3.2 Distribution of MNF tariff rates, 2013 and 2017  
 
Note:  For 2013 and 2017 respectiv ely, 0.1% and 0.2% of total lines are not shown as they correspond to 
sporadic rates falling in between the main tariff rates (e.g. 3%, 17%, 22%). 2013 tariff is based on 
HS12 nomenclature; 2017 tariff is based on HS17. Calculations exclude in -quota and sp ecific rates 
and include the ad valorem  part of compound and alternate rates. Figures in brackets refer to the 
percentage of total lines.  
Source:  WTO Secretariat calculations, based on online data provided by the authorities.  
3.16.   Non-ad valorem  duties, mainl y applied to agricultural products, may conceal high tariff 
protection. According to WTO Secretariat calculations, in 2017 the calculable ad valorem  
equivalents (AVEs) of the non -ad valorem  duties in general fall in the range from 0.2% (clove 
cigarettes) t o 465% (certain manufactured tobacco) (Chart 3.3).  
Chart 3.3 Tariff distribution by type of duty, 2017  
 
Source:  WTO Secretariat calculations based on data provided by the authorities.  
3.17.   The dispersion of MFN tariff rates, as reflected by the standard deviation, increased slightly 
from 9.5% in 2013 to 10.9% in 2017. As a proportion of all tariffs, "domestic tariff peaks", defined 
as those exceeding three times the overall simple average applied rate, declined. During the same 
period, the proportion of tariffs exceeding 15% increased. The number of lines with a tariff rate at 
30% accounted for 10.1% of all tariff lines in 2017, up from 4.7% in 2013 (Chart 3.2).  
(64.6%)
(9.0%)
(1.0%)(6.0%)
(2.1%) (8.6%)
(2.8%)(4.7%)
(0.6%) (0.4%)(56.2%) 
(10.6%)
(0.8%)(5.9%)(5.1%)(6.7%)
(3.0%)(10.1%)
(0.9%) (0.5%)
01,0002,0003,0004,0005,0006,0007,000
Duty free 5% >5%<10% 10% 15% 20% 25% 30% >30%-90% Specific
ratesNumber of tariff linesChart 3.2  Distribution of MFN tariff rates, 2013 and 2017
MFN 2013
Total number of lines:  9,417MFN 2017
Total number of lines: 11,690
Note:  For 2013 and 2017, respectively 0.1% and 0.2 % of total lines are not shown as they correspond to sporadic rates falling in 
between the main tariff rates  (eg. 3%, 17%, 22%).    2013 tariff is based on HS12 nomenclature; 2017 tariff is based on HS17.  
Excluding in -quota and specific rates.  Including the ad valorem part of compound and alternate rate.  Figures in brac kets refer to 
the percentage of total lines.
Source:  WTO Secretariat calculations, based on online data provided by the authorities.
Chart 3.[1]   Tariff distribution by type of duty, 2017
Source:  WTO Secretariat calculations, based on data provided by the authorities.Ad valorem duty
42.8%
Duty free
56.2%Non-ad valorem duty
1.0%
Alternate duty  0.02%
2 lines:
1certain paper
1certain fansSpecific duty  0.5%
64 tariff lines:
1 = pineapples
58 = alcoholic  beverages
5 = cigarettes and cigars
Compound duty  0.4%
50 tariff lines:
20 = edible fruit
29 = tobacco products
1 = remelting scrap ingotsWT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.18.   Malaysia's tariff quotas continue to be applied to 2 7 tariff lines at the HS 10 -digit level; 
according to the authorities, this is to meet the requests of domestic small producers. The type of 
products is the same as in 2013, although the number of lines increased from 20 to 27, due to 
nomenclature change a nd splitting of lines. The products covered include live swine and poultry, 
poultry and pork meat, liquid milk and cream, and round cabbage. In -quota rates range from zero 
(round cabbages) to 25% (pork), while out -of-quota rates range from 20% to 90% (roun d 
cabbages). Quotas are allocated on a first -come -first-served basis to importers. Based on MA2 
notification in 2015, the quota filling rate ranged from 0% to 278% (Section 4.1).  
3.1.3.2   Duty concessions /exemptions  
3.19.   Import duty exemptions continue to be applied to  manufacturing companies on raw 
materials and components used in the manufacture of goods for export, and for machinery and 
equipment not available in Malaysia but used directly in the manufacturing process.  
3.20.   The authorities indicated that in 2016, revenue  forgone from import duty and GST relief was 
US$5.2 billion, equivalent to 22% of total tariff revenue.  
3.1.3.3   Tariff preferences   
3.21.   Malaysia's preferential tariffs for intra -ASEAN trade remain under the ASEAN Harmonized 
Tariff Nomenclature (AHTN) 2017 classificat ion system, which consists of 11,690 ten -digit lines. 
Malaysia transposed ATIGA into HS 2017, and is undertaking a transposition exercise for its 
preferential tariff commitments under all ASEAN regional RTAs and MAFTA from HS2012 to 
HS2017.  
3.22.   The simple aver age rates under all preferential arrangements are lower than the simple 
average MFN rate, although the averages among arrangements are different, ranging from 0.1% 
to 7.4% ( Table 3.3).  
Table 3.3 Summary analysis of Malaysia's preferential tariffs, 2017  
 Total  WTO agriculture  WTO non -
agriculture  
Average  
(%) Range  
(%) Duty -
free 
rates 
(%) Average  
(%) Duty -
free 
rates 
(%) Average  
(%) Duty -
free 
rates 
(%) 
MFN 7.5 0-90 56.2 3.3 67.6 8.0 54.6 
ASEAN Trade in Goods 
Agreement (ATIGAa - HS17)  0.1 0-30 98.7 0.4 91.4 0.04 99.7 
ASEAN - Australia New Zealand 
FTA (AANZFTA - HS12)  0.8 0-40 87.3 0.9 86.6 0.8 87.4 
ASEAN - China FTA (ACFTA - 
HS12)  2.3 0-40 87.4 0.4 92.6 2.6 86.6 
ASEAN - India FTA (AIFTA - 
HS07)  3.6 0-90 76.4 1.4 87.9 3.9 74.8 
ASEAN - Japan (AJCEPA - HS07)  1.8 0-90 85.1 1.4 88.8 1.8 84.6 
ASEAN - Korea, Rep. of FTA 
(AKFTA - HS12)  2.1 0-90 83.4 1.0 89.2 2.2 82.5 
Malaysia  - Australia FTA (MAFTA - 
HS12)  0.1 0-40 98.5 0.7 91.1 0.1 99.6 
Malaysia - Chile FTA (MCFTA -
HS07)  0.7 0-90 88.7 1.4 88.9 0.7 88.7 
Malaysia  - India CECA (MICECA - 
HS07)  3.3 0-90 76.5 1.2 88.0 3.6 74.9 
Malaysia  - Japan EPA (MJEPA - 
HS07)  0.2 0-50 98.2 1.2 90.6 0.1 99.2 
Malaysia - New Zealand FTA 
(MNZFTA - HS07)  0.1 0-40 98.7 0.7 91.3 0.05 99.7 
Malaysia  - Pakistan CEPA  
(MPCEPA - HS07)  4.9 0-60 70.8 0.9 89.0 5.5 68.2 
Malaysia - Turkey FTA (MTFTA - 
HS12)  3.4 0-90 63.3 1.4 77.8 3.7 61.3 
PTA-D8b (HS12)  7.4 0-90 56.2 3.3 67.6 7.9 54.6 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  a Including Brunei Darussalam, Cambodia, Indonesia, Laos, Myanmar, Philippines, Singapore, Thailand 
and Viet Nam.  
b Including Bangladesh, Egypt, Indonesia, Iran, Nigeria, Pakistan and Turkey.  
Note:  Calculations exclude in -quota rates and specific rates and include the ad valorem  part of compound 
and alternate rates. Preferential tariffs in various HS nomenclatures were adjusted by the Secretariat 
into HS17 for calc ulation purposes.  
Source:  WTO Secretariat calculations, based on data received by the authorities.  
3.1.4   Other charges affecting imports  
3.23.   The authorities stated that no fees are imposed by Customs for customs procedures.  
3.1.5   Import prohibitions, restrictions , and licensing  
3.24.   Import prohibitions and licensing requirements are regulated under the Customs 
(Prohibition of Imports) Order 2017, which came into force in April 2017, while the Customs 
(Prohibition of Imports) Order 2012 was revoked at the same time.8 The orde r contains four 
schedules, according to which, some goods are absolutely prohibited while some are prohibited 
from importation except under an import licence ( Table 3.4).  
Table 3.4 Import prohibition and licensing schedules  
Schedule  Description  
First schedule  Goods absolutely prohibited from importation  
Second schedule   
Part I  Conditional prohibition except under import licence  
Part II  Conditional prohibition except under import licence, and does not apply to specified free 
zones  
Part III  Conditional prohibition except under import licence, and shall not apply to Labuan, 
Langkawi, Tioman and specified free zones  
Third schedule   
Part I  Conditional prohibition except in the manner provided  for 
Part II  Conditional prohibition except in the manner provided  for, and shall not apply to the 
free commercial zone  
Part III  Conditional prohibition , except in the manner provided  for, for goods controlled under 
the International Trade in Endangered Species Act 2008  
Fourth schedule   
Part I  Conditional prohibition except conforming to the Malaysian standards or other standards 
approved by the Malaysian authorities and in the manner provided  for 
Part II  Conditional prohibition except conforming to the Malaysian standards or other standards 
approved by the Malaysian authorities and in the manner provided  for, and does not 
apply to the free commercial zones  
Source:  Customs (Prohibition of Imports) Order 2017.  
3.25.   Import permits cannot be changed or amended, and cannot be re -used.  
3.26.   In January 2014, the Government decided that the "approved permits" (AP) system 
governing the importation and distribution of foreign -built or assembled cars, trucks, and 
motorcycles, which forms part of the National Automotive Policy (NAP), was to be continued with  
some additions: i.e. opening to more entrepreneurs to venture into this business. The policy for 
franchise APs, as guided under the NAP, remains.9  
                                                
8 Customs (Prohibition of Imports) Order 2017 (P.U. (A) 103), 1 April 2017. Viewed at: 
http://www.aseanlip.com/malaysia/tax/legislation/customs -prohibition -of-imports -order -2017/AL14612  
[20/06/17].  
9 WTO document, WT/TPR/S/292/Rev.1, 8 April 2014.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.1.5.1   Prohibitions (first schedule)  
3.27.   Malaysia prohibits imports of a number of products, on religious, security, health, and 
environmental protection and safety grounds. It prohibits the importation of logs, wood i n the 
rough, wood roughly squared or half squared but not further manufactured, and baulks, from 
Indonesia . Another 14 major product categories are absolutely prohibited from importation from 
all countries. These include: some broadcast receivers; comb or comb chunk (the authorities 
stated that the pest risk analysis conducted on this product revealed high risks of infestation pests 
with adverse effects); lightening arresters containing radioactive material; liquid -filled type electric 
heating bags, cushion s, pillows, pouches or pads using alternating current (AC) or AC and direct 
current (AC/DC); new pneumatic snow tyres and new retreaded snow tyres for all types of 
vehicles; poisonous chemicals and minerals; certain animal feed; sodium arsenite; and substa nces 
covered under the Montreal Protocol.  
3.1.5.2   Import licensing  (second, third, and fourth schedules)  
3.1.5.2.1   Second schedule  
3.28.   According to the Customs (Prohibition of Imports) Order 2017, part I of the second schedule 
lists products that are prohibited from importation  except under an import licence. All goods 
originating from (and exporting to) Israel are subject to import (and export) licensing 
requirements . Imports of  16 product categories from all countries require an import licence ( Table 
3.5).  
Table 3.5 Import licensing  
Description of product  Automatic 
licensing  Ministry/Department/Statu
tory Body issuing licence  
All goods from Israel  No MITI 
Sugar (including cane and beet sugar, chemically pure 
sucrose, fructose and glucose)  Yes Ministry of Domestic Trade, 
Cooperatives and 
Consumerism  
Radar apparatus, radio navigational aid apparatus, including 
other parts and accessories; parabolic antenna including 
other parts and accessories  Yes SIRIM Berhad  
Chassis fitted with engines, for motor vehicles of heading 
87.02, 87.03, 87.04, or 87.05  Yes MITI 
Chassis not fitted with engines, for motor vehicles of heading 
87.02, 87.03, 87.04,  or 87.05  Yes MITI 
Bodies (including cabs) for motor vehicles falling within 
headings 87.02, 87.03, 87.04, or 87.05  Yes MITI 
Motor -cycles, auto -cycles (including mopeds), electric 
powered motorcycles, motorised bicycles and cycles fitted 
with an auxiliary motor (excluding side cars)  Yes MITI 
Road tractors for semi -trailers (including prime movers), 
completely built -up, old  Yes MITI 
Special purpose motor vehicles, other than those principally 
designed for the transport of persons or goods (for example 
breakdown lorries, crane lorries, concrete -mixer lorries, road 
sweeper lorries, spraying lorries, mobile workshops, mobile 
radiological units), excluding fire fighting vehicles  Yes MITI 
Used brakes and servo -brakes including used brake pad, and 
brake lining, for motor vehicles of headings 87.01, 87.02, 
87.03, 87.04, 87.05, 87.09, and 87.11;  
All kinds of reusable batteries (accumulators) for motor 
vehicles of headings 87.01, 87.02, 87.03,  87.04, 87.05, 
87.09, and 87.11  No MITI 
Unmanufactured tobacco; tobacco refuse  No National Kenaf, Tobacco 
Board, and Department of 
Agriculture (Peninsular 
Malaysia, Labuan, Sabah and 
Sarawak)  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Description of product  Automatic 
licensing  Ministry/Department/Statu
tory Body issuing licence  
Trichloroethane (Mythyl chloroform)  Yes MITI 
Optical disc mastering and replicating machines and parts 
thereof  No Ministry of Domestic Trade, 
Cooperatives and 
Consumerism  
Toxic chemicals and their precursors covered under the 
Convention on the Prohibition of the Development, 
Production, Stockpiling and Use of Chemical Weapons and on 
Their Destruction 1993 (CWC)  Yes MITI 
Substances structurally derived from Phenethylamine and 
their salts  No Pharmaceutical Services 
Division, Ministry of Health  
Hydrochlorofluorocarbons (HCFCs) covered under the 
Montreal protocol, Annex C - Group 1  Yes Department of Environment  
Flat-rolled products of other alloy steel, of a width of 600  mm 
or more  Yes MITI 
Source:  Customs (Prohibition of Imports) Order 2017. Viewed at: 
http://www.aseanlip.com/assets/uploads/aseanlic -62216 -pua_20170331_P.U.(A)103_Import.pdf  
[20/06/17]. And information provided by the authorities.  
3.29.   Part I I of the second schedule lists products under "conditional prohibition except under 
import  licence, and does not apply to specified free zones". Currently, this list is identical to the list 
under Part I.  
3.30.   According to Part III of the second schedule, some  iron and steel products are prohibited 
from importation except under an import licence; these do not apply to Labuan, Langkawi, 
Tioman, and specified free zones. Import  licences for these products are issued by MITI. Malaysia 
notified that, effective from  1 August 2017, import licence requirements for 181 tariff lines of iron 
and steel products had been abolished.10 
3.1.5.2.2   Third schedule  
3.31.   Part I of the third schedule lists products prohibited from import except in the manner 
provided for in this schedule. These pro ducts are mainly subject to licensing requirements on SPS 
grounds. The products are animals and animal products, plant and plant products, as well as 
agricultural products such as pasta, rice, flour, vegetables, coffee, soil including earth, food 
products,  solid waste, logs and wood in the rough from all countries (except Indonesia), wood and 
articles of wood, radioactive materials and irradiating apparatus, baby feeding bottles, ceramic 
tableware and kitchenware, tobacco and manufactured tobacco, alcohol, stones, and water.  
3.32.   Licences may be issued by the Malaysian Quarantine and Inspection Services (MAQIS), 
Department of Agriculture (DOA), Department of Wildlife and National Park, Food Safety and 
Quality Division of the Ministry of Health, Department of Nat ional Solid Waste Management, 
Ministry of Home Affairs, Pesticide Board under the DOA, and Atomic Energy Licensing Board. On a 
number of products, inspection is required before an import licence is issued.  
3.33.   At the federal level, relevant legislation refers  to: Malaysian Quarantine and Inspection 
Services Act 2011, Plant Quarantine Regulations 1981, Wildlife Conservation Act 2010, Atomic 
Energy Licensing Act 1984, Radiation Protection (Licensing) Regulations 1986, and Atomic Energy 
Licensing (Exemption) (Low  Activity Radioactive Material) Order 2002, among others. For 
importation into Sabah and Sarawak, import permits are issued by the relevant authorities, and 
inspections and approvals granted by relevant authorities there.   
3.34.   This schedule also lists a number  of products, the importation of which requires licences 
issued by various agencies for different reasons:  
a. bullet -proof suits, pepper spray, arms and ammunition, fireworks; their importation 
must be accompanied by an import permit or an approval letter iss ued by the Chief 
Police Officer;  
                                                
10 WTO document, G/LIC/N/2/MYS/8, 18 August 2017.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  b. toxic and hazardous waste; their importation requires approval from the Director 
General of Environmental Quality;  
c. amusement machines are imported with a letter of approval from the Ministry of 
Finance;  
d. rough diamonds must be imported with a Kimberley Process Certificate issued by the 
exporting party;  and 
e. substances covered under the Rotterdam Convention are imported with a letter of 
consent issued by the Department of Environment.  
3.35.   In addition, the importation of second -hand materials, such as used pneumatic tyres and 
used retreaded pneumatic tyres of rubber, requires a letter of approval from SIRIM Berhad. Used 
household electronics including televisions, washing machines, cloth dryers, refrigerators, air 
conditioners, and personal computers, must be accompanied by a letter of approval from 
Environmental Quality, and must be inspected by a competent authority or certification body or 
any other relevant agency.  
3.36.   Part II of the third schedule lists goods that may not be importe d into Malaysia except in the 
manner provided for; however, these requirements do not apply to free commercial zones. These 
products include: cigarettes that must meet packaging requirements to contain health information; 
apparatus or equipment for the bre wing of beer at home, which must be accompanied by a letter 
of approval; beer, wine, vermouth and other wine of grapes, other fermented beverages, ethyl 
alcohol, spirits and liqueurs, etc., for which every bottle, can, keg or other container of the goods 
must be affixed with a tax stamp.  
3.37.   Part III of the third schedule applies to goods in transit controlled under the International 
Trade in Endangered Species Act 2008. They include: any terrestrial animal; any marine animal; 
any terrestrial plant excluding timber species; and any timber species, as specified in the 
appendices of the International Trade in Endangered Species Act 2008. Goods in transit must be 
accompanied by a valid export or re -export permit/licence/certificate, or a written permission in 
accordance with the CITES, issued by the competent authority of the country of export or 
re-export. Where required by the country of import, these goods must obtain a valid import 
permit/licence/certificate or a written permission, in accordance with the CITE S, issued by the 
competent authority of the country of destination.  
3.1.5.2.3   Fourth schedule  
3.38.   Under part I of the fourth schedule, goods may not be imported into Malaysia except those 
conforming to the Malaysian standards or other standards approved by the Malaysian  authorities 
and in the manner provided for in the schedule. These include cement; ceramic products; and 
plastic flushing cisterns equipped with mechanism. Their importation must be accompanied by a 
certificate of approval, or a letter of exemption, issued  by or on behalf of the Chief Executive of 
the Construction Industry Development Board (CIDB), certifying that the import conforms to the 
approved Malaysian standards.  
3.39.   Part II of the fourth schedule lists goods for which importation is subject to TBT 
requirements; these requirements do not apply to free commercial zones ( Table 3.6).  
Table 3.6 Imports subject to TBT requirements  
Description of product  Import requirement  
Iron and steel products  Construction Industry Development Board (CIDB), or SIRIM Berhad (non -
construction)  
Aluminium products  Construction Industry Development Board (CIDB), or SIRIM Berhad 
(non-construction)  
Electrical apparatus or 
accessories  Suruhanjaya Tenaga, or the equivalent counterpart in the case of certain 
states (Sarawak), certifying that the specified domestic electrical apparatus 
conforms to the Malaysian or IEC standards, or British standards, or any other WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Description of product  Import requirement  
equivalent standards approved by the Suruhanjaya Tenaga  
New pneumatic tyres and new 
retreaded pneumatic tyres, of 
rubber  Must comply to the standards as prescribed under the Motor Vehicles 
(Construction and Use) Rules 1959; imports must be accompanied by:  
- E-mark and certificate issued by the World Forum for Harmonization of 
Vehicles Regulation; or  
- DOT mark and certificate issued by the US National Highway Traffic Safety 
Administration; or  
- MS mark and ce rtificate issued by a certification agency or testing agency 
which is recognized/accredited by the Department of Standards Malaysia.  
Toys, games and children's 
bicycles  Importation must be accompanied by:  
- certificate of conformance (COC) issued under th e Consumer Protection Act 
1999;  
- notification form or a letter of clarification  
Apparatus or equipment to be 
attached to or connected to a 
public communication 
network or system  A certificate of approval issued by SIRIM QAS International Sdn. Bhd. Import  
must be certified to the Malaysian standards, or international standards, or 
technical codes, or technical declarations, subject to the Communications and 
Multimedia Act 1998  
Radio communication 
apparatus or equipment in 
the frequency band up to 
420 THz A certificate of approval issued by SIRIM QAS International Sdn. Bhd. Import 
must be certified to the Malaysian standards, or international standards, or 
technical codes, or technical declarations, subject to the Communications and 
Multimedia Act 1998  
Flowers, vegetables, 
coconuts, fruits, coffee, 
spices, groundnuts, sugar 
cane A certificate of conformity of agricultural produce, issued by MAQIS, and 
inspection and approval by MAQIS (SPS measures)  
Construction products  A certificate of approval, or a letter of exemption, by the Chief Executive 
Officer of the Construction Industry Development Board (CIDB)  
Non-rechargeable cells and 
primary batteries  A certificate of conformance, a notification form, or a letter of clarification, 
issued by the Controlle r of Consumer Affairs, under the Consumer Protection 
Act 1999  
Apparatus or equipment 
which are integrated with a 
communications module for 
connecting to a public 
communications network or 
for radio communications 
utilizing the frequency band 
up to 420 THz  A certificate of approval issued by SIRIM QAS International Sdn. Bhd. Import 
must be certified to the Malaysian standards, or international standards, or 
technical codes, or technical declarations, subject to the Communications and 
Multimedia Act 1998  
Liquid-filled type electric 
heating bag, cushion, pillow, 
punch or pad filled with liquid, 
using 3 -pin inlet alternating 
current (AC) or AC and direct 
current (AC/DC)  A certificate of approval issued by the Suruhanjaya Tenaga or the equivalent 
counterpart in  Sarawak, certifying that the product conforms to the Malaysian 
standard, or IEC standard, MS IEC 60335 -1 
Motorcyclists' safety helmets  Comply to standard as prescribed under the Motor Vehicles (Construction and 
Use) Rules 1959, governed by the Road Trans port Department, and the 
importation is accompanied by: E -Mark and certificate; or MS Mark and 
certificate, issued by relevant authorities  
Some wheat flour  A letter of consent, by the Ministry of Domestic Trade, Cooperatives and 
Consumerism  
Gas discharge  headlamp 
including gas discharge bulb 
for motor vehicles  Comply to the standards under the Motor Vehicles (Construction and Use) 
Rules 1959, and E -Mark and certificate  
New brake lining or brake pad  Comply to the standards under the Motor Vehicles (Construction and Use) 
Rules 1959, E -Mark and certificate, or MS mark and certificate  
Vehicle alarm system and 
immobilizer for motor vehicles  Comply to the standards under the Motor Vehicles (Construction and Use) 
Rules 1959, E -Mark and certificate, or MS  mark and certificate  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Description of product  Import requirement  
New seat for motor vehicles  Comply to the standards under the Motor Vehicles (Construction and Use) 
Rules 1959, and E -Mark and certificate  
Speed monitoring device for 
motor vehicles  Comply to the standards under the Motor Vehicles (Construction and Use) 
Rules 1959, and E -Mark and certificate  
Wheat flour for human 
consumption  Certificate of approval issued by SIRIM QAS International Sdn. Bhd.  
Source:  Customs (Prohibition of Imports) Order 2017. Viewed at: 
http://www.aseanlip.com/assets/uploads/aseanlic -62216 -pua_20170331_P.U.(A)103_Import.pdf  
[20/06/17]. And information provided by the authorities.  
3.1.6   Anti-dumping, countervailing, and safeguard measures  
3.40.   Anti-dumping (AD) and countervailing duties (CVD) continue to be regulated under the 
Countervailing and Anti -Dumping Duties Act 1993, and the Countervailing and Anti -Dumping 
Duties Regulations 1994, both  of which have not been amended since the previous review in 2014. 
MITI is responsible for the administration of legislation on AD and CVD in Malaysia.  
3.41.   Since its last Review, Malaysia has submitted semi -annual reports on anti -dumping actions 
to the WTO ( Table 3.7). According to the notifications, the number of investigation initiations 
reached its peak in 2015, while the number of definitive anti -dumping measures reac hed its peak 
in 2016. In 2014, seven measures were terminated, and in 2016, one measure was terminated.  
Table 3.7 Anti-dumping investigations and measures imposed, 2014 -17 
 2014_1  2014_2  2015_1  2015_2  2016_1  2016_2  2017_1  
Investigation initiations  8 8 19 14 5 0 4 
Reviews/other subsequent 
proceedings  7 7 0 0 2 2 0 
Definitive anti -dumping 
measures in force  19 12 18 18 23 22 22 
Refund request  0 0 0 0 0 0 0 
Termination of measures  0 7 0 0 0 1 0 
Source:  WTO Secretariat, based on Malaysia's notifications to the WTO.  
3.42.   From 2014 to 30 June 2017, imports from nine Members were affected ( Table 3.8). AD 
duties were applied mostly on biaxially oriented polypropylene film and steel wire rod, among 
others.  
Table 3.8 Definitive anti -dumping me asures in force, by country and product, 2014 -
30 June  17 
 2014_1  2014_2  2015_1  2015_2  2016_1  2016_2  2017_1  
Canada  1 0 0 0 0 0 0 
China  4 2 5 5 7 7 7 
Indonesia  3 2 4 4 4 4 4 
Republic of Korea  3 2 3 3 4 4 4 
Separate Customs Territory 
of Taiwan, Penghu, Kinmen 
and Matsu ( Chinese Taipei ) 2 2 2 2 2 2 2 
Thailand  3 3 3 3 3 2 2 
Viet Nam  1 1 1 1 3 3 3 
Philippines  1 0 0 0 0 0 0 
United States  1 0 0 0 0 0 0 WT/TPR/S/366 /Rev.1  • Malaysia  
 
- 50 - 
 
   2014_1  2014_2  2015_1  2015_2  2016_1  2016_2  2017_1  
Total:  19 12 18 18 23 22 22 
Products:         
Steel wire rod  4 3 4 4 4 4 4 
Biaxially oriented 
polypropylene film  5 5 5 5 5 5 5 
Electrolytic tinplate  2 2 2 2 2 2 2 
Polyethylene terephthalate  1 1 4 4 4 3 3 
Hot rolled coil  0 0 2 2 2 2 2 
Prepainted, painted or colour 
coated steel coils  0 0 0 0 2 2 2 
Cold rolled coils of alloy and 
non-alloy steel  0 0 0 0 3 3 3 
Cellulose fibre reinforced 
cement flat and pattern 
sheets  0 0 0 0 1 1 1 
Fibre cement board  1 1 1 1 0 0 0 
New print  5 0 0 0 0 0 0 
Stranded wire  1 0 0 0 0 0 0 
Total:  19 12 18 18 23 22 22 
Source:  WTO Secretariat, based on WTO notifications.  
3.43.   To date, Malaysia has not taken any countervailing measures.  
3.44.   Safeguards are regulated under the Safeguards Act of 2006, most recently amended in 
2012, and the Safeguards Regulations 2007.  
3.45.   Malaysia notified to the WTO that during the review period (2014 -17): four safeguard 
investigations were initiated, all concerning steel products; three provisional measures, and three 
definitive measures were applied; and one investigation was terminated ( Table 3.9).  
Table 3.9 Initiation of safeguard investigations, provisional measures, final measures, 
and termination 2014 -17 
Investigation initiations, provisional measures, final measures, and termination  
Investigation initiations    
Products concerned  Date of initiation  Agency applied for safeguard 
investigation  
Steel wire rod, deformed bar in coil  29 May 2016  Malaysia Steel Association  
Steel concrete reinforcing bar  28 May 2016 Malaysia Steel Association  
Hot rolled coils  11 September 2015  Megasteel Sdn. Bhd.  
Hot rolled steel plate  18 August 2014  Ji Kang Dimensi Sdn. Bhd.  
Provisional safeguard measures    
Products concerned  Provisional  safeguard  duty Exceptions  
Hot rolled  steel plates  23.93% of c.i.f. price for 200 
days, from 14 December 2014  Imports from developing countries that 
are less than 3% individually are not 
subject to the provisional safeguard 
measures, except imports from China, 
Ukraine, the Republic of Korea,  
Indonesia, and Singapore  
Steel concrete reinforcing bars  13.42% of c.i.f price for 200 
days, from 26 September 
2016 Imports from developing countries that 
are less than 3% individually are not 
subject to the provisional safeguard 
measures, except imports  from China  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Investigation initiations, provisional measures, final measures, and termination  
Steel wire rod and deformed bar in coil  13.90% of c.i.f price for 200 
days, from 27 September 
2016 Imports from developing countries that 
are less than 3% individually are not 
subject to the provisional safeguard 
measures, except imports from China, 
the Republic of Korea, and Singapore  
Finding a serious injury or threat 
thereof caused by increased imports    
Products concerned  Definitive safeguard 
measures  Applicable to:  
Steel wire rods and deformed bar in coils  15 April 2017 -14 April 2018: 
13.90%  
15 April 2018 -14 April 2019: 
12.90%  
15 April 2019 -14 April 2020: 
11.90%  Imports from all sources globally except 
developing countries with imports less 
than 3% individually and LDCs  
Steel concrete reinforcing bars  14 April 2017 -13 April 2018: 
13.42 % 
14 April 2018 -13 April 2019: 
12.27%  
14 April 2019 -13 April 2020: 
11.10%  Imports from all sources globally except 
developing countries with imports less 
than 3% individually and LDCs  
Hot rolled steel plate  2 July 2015 -1 July 2016: 
17.40%  
2 July 2016 -1 July 2017: 
13.90%  
2 July 2017 -1 July 2018: 
10.40%  Imports from all sources globally except 
developing countries with imports less 
than 3% individually and LDCs  
Termination of investigation with no 
safeguard measures imposed    
Products concerned  Initiation and termination 
of investigation  Reasons  for termination  
Hot rolled coils  Investigation initiated in 
September 2014, terminated 
on 8 January 2016  Imports of the product have not caused 
serious injury or threat of serious injury 
to the domestic industry.  
Source:  WTO notifications.  
3.2  Measures  Directly Affecting Exports  
3.2.1   Customs procedures and requirements  
3.46.   Since the previous Review in 2014, there has not been any significant change to export 
procedures in Malaysia. To export, it takes 48 hours and US$321 to conduct border compliance, 
and 10 hours and US$45 to conduct documentary compliance ( Table 3.10 ). Documents required to 
export are: customs export declaration, commercial invoice, packing list, bill of lading, and 
certificate of origin.11 Export d eclarations may be made by the owner, exporter, consignor or an 
agent authorized and approved by Customs.  
  
                                                
11 World Bank (2017), Doing Bus iness 2017 – Malaysia. Viewed at: 
http://www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/mys.pdf  
[12/06/2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 3.10 Export time and cost, 2017  
Indicator  Malaysia  East Asia and Pacific  
Time to export: border compliance (hours)  48 57 
Cost to export: border compliance (US$)  321 402 
Time to export: documentary compliance (hours)  10 73 
Cost to export: documentary compliance (US$)  45 132 
Source:  World Bank (2017), Doing Business 2017 – Malaysia. Viewed at: 
http://www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/mys.pdf  
[12/06/17].  
3.47.   Export proceeds must be repatriated to Malaysia in full as per the sales contract, within 
six months from the date of export. They may be received in foreign currencies (except for the 
currency of Israel) or in ringgit from an external account.  Exporters may retain up to 25% of their 
export proceeds in foreign currency and may reconvert the remaining 75% to ringgit (at zero bid -
offer spread if conversion is undertaken on the same day).12  
3.2.2   Taxes , charges, and levies  
3.48.   A number of products remain subject to export duties. In 2017, out of 11,690 ta riff lines at 
the HS 10 -digit level, 217 lines are subject to export duties. Most of the rates are ad valorem , 
ranging from 4.5% to 20% (Section 4.1) . Ten lines have specific rates (live plants, certain seeds, 
and rattans) ( Table 3.11). The authorities stated that export taxes are levied to ensure sufficient 
supply of raw materials for domestic downstream industries, and for food security purposes. 
Export duties are ap plied on the f.o.b. value of the goods.  
Table 3.11 Malaysia export duties, 2017  
Number 
of lines  Export duty 
rates  Description of products  
10 Specific rate  Live plants, certain seeds, rattans  
5 4.5-8.5% Crude palm oil  
2 5% Palm nuts and kernels suitable for sowing  
20% Palm nuts and kernels not suitable for sowing  
110 15% Wood in the rough (108 lines), and certain unwrought lead, and lead waste 
and scrap  
21 10% Palm kernel oil; crude petroleum oil; ferrous waste and scrap; copper waste 
and scrap; master alloys of copper; nickel mattes; nickel oxide sinters; not 
alloyed nickel; nickel alloys; aluminium waste and scrap  
69 5% Certain live animals; palm nuts, palm kernel oil (refined, bleached, 
deodorized (RBD)); slag, ash and residues; silver; platinum; refined 
copper, unwrought; unwrought zinc  
Source:  Information provided by the authorities.  
3.49.   The number of products subject to export duties declined significantly, from 482 lines 
(HS 9-digit level) in 2014, to 217 lines (HS 10 -digit level) in 2017. This was due partly to the 
merging of tariff lines during the transposition exercise. As the number of products subject to 
export duties was reduced, Malaysia's revenue from export duties fe ll from RM  1.968 billion in 
2012 to RM  980 million in 2016.  
3.50.   In addition, a cess of 0.2% of the export value is charged to manufacturers of rubber 
products (Section 4.1).  
3.2.3   Export prohibitions , restrictions, and licensing  
3.51.   Similar to import licensing requirements, export prohibitions and licensing requirements are 
regulated under the Customs (Prohibition of Exports) Order 2017, which came into force in 
April 2017, at which time the Customs (Prohibition of Exports) Order 2012 was revoked.13 This 
                                                
12 BNM online  information. Viewed at: 
http://www.bnm.gov.my/index.php?ch=en_press&pg=en_press&ac=4316&lang=en  [29/09/17].  
13 Customs (Prohibition of Exports) Order 2017 (P.U. (A) 102), 31 March 2017. Viewed at: 
http://www.aseanlip.com/malaysia/tax/legislation/custom s-prohibition -of-exports -order -2017/AL14609  
[30/06/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  order co ntains three schedules, according to which, some goods are absolutely prohibited while 
some are prohibited from exportation except under an export licence ( Table 3.12). 
Table 3.12 Export prohibition and licensing schedules  
Schedule  Description  
First schedule  Goods absolutely prohibited from exportation  
Second schedule  Conditional prohibition except under  export licence  
Third schedule   
Part I  Conditional prohibition except in the manner provided  for 
Part II  Conditional prohibition , except in the manner provided  for, for goods controlled under the 
International Trade in Endangered Species Act 2008  
Source:  Customs (Prohibition of Exports) Order 2017.  
3.2.3.1   Export prohibitions (first schedule)  
3.52.   According to the first schedule, goods absolutely prohibited for exportation are: poisonous 
chemicals and minerals; and substances covered under the Montreal Protocol.  
3.2.3.2   Export  licensing (second and third schedules)  
3.53.   The second schedule lists goods  that are prohibited for export except under an export 
licence ( Table 3.13).  
Table 3.13 Export licensing  
Description of product  Ministry/Department/Statutory Body 
issuing licence  
All goods to Israel  Ministry of International Trade and Industry  
Unrooted cuttings, budwood, budded stumps, seedlings 
and seeds, of rubber, for sowing or planting  Ministry of Plantation Industries and 
Commodities  
Oil palm living tissues/fruits/seeds or nuts/pollens  Ministry of Plantation Industries and 
Commodities  
Oils and fats of palm oil  Malaysian Palm Oil Board  
Pineapple slips  Malaysian Pineapple Industries Board  
Pineapple, fresh, chilled and preserved by freezing  Malaysian Pineapple Industries Board  
Bamboo, rattans, wood, logs, charcoal, timber, etc.  Malaysian Timber Industry Board and 
corresponding agencies in Sabah and Sarawak  
Minerals, ores, coal, lignite, peat, coke, etc.  Ministry of Natural Resources and Environment  
All kinds of natural sands  Ministry of Natural Resources and Environment  
Slag and hardhead of tin  Ministry of Natural Resources and Environment  
Military clothing, headgear, footwear, and other textile 
articles  Ministry of Defence  
Ministry of International Trade and Industry  
Sugar  Ministry of Domestic Trade, Cooperatives and 
Consumerism  
Cement clinker  Ministry of Domestic Trade, Cooperatives and 
Consumerism  
Portland cement  Ministry of Domestic Trade, Cooperatives and 
Consumerism  
Waste and scrap  Ministry of International Trade and Industry  
Recovered (waste and scrap) paper or paperboard  Ministry of International Trade and Industry  
Toxic chemicals and their precursors covered under the 
Convention on the Prohibition of  the Development, 
Production, Stockpiling and Use of Chemical Weapons and 
on Their Destruction 1993 (CWC)  Ministry of International Trade and Industry  
Acetyl bromide  Pharmaceutical Services Division, Ministry of 
Health  
Acetyl chloride  Pharmaceutical Services Division, Ministry of 
Health  
Chemicals/substances covered under the 1988 United Pharmaceutical Services Division, Ministry of WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Description of product  Ministry/Department/Statutory Body 
issuing licence  
Nations Convention Against Illicit Traffic in Narcotic Drugs 
and Psychotropic Substances  Health  
Hydrochlorofluorocarbons (HCFCs) covered under the 
Montreal Protocol, Annex C – Group 1  Department of Environment  
Mercury (Hg) and mercury compounds covered under the 
Minamata Convention on Mercury  Pharmaceutical Services Division, Ministry of 
Health  
Source:  Customs (Prohibition of Exports) Order 2017 (P.U. (A) 102), 31 March 2017. Viewed at: 
http://www.aseanlip.com/malaysia/tax/legislatio n/customs -prohibition -of-exports -order -
2017/AL14609  [30/06/17].  
3.54.   Part I of the third schedule lists products prohibited from export except in the manner 
provided  for:  
a. products subject to licensing requirements on SPS grounds, such as animals and animal 
products, plants and plant products, agricultural and food products including rice and 
flour;  
b. arms and ammunition, antiquities or heritage items, toxic and/or hazardous waste, 
pesticides, radioactive chemical elements and others, rough diamonds, tributyltin 
compounds including preparations, diesel fuel, petrol, LPG; and  
c. used household electronics such as TV sets, washing machines, cloth dryers, 
refrigerators, air conditioners, personal computers, hand phones and mobile phones.  
3.55.   In accordance with relevant leg islation (Malaysian Quarantine and Inspection Services Act 
2011, Wildlife Conservation Act 2010, Control of Supplies Act 1961, Arms Act 1960, National 
Heritage Act 2005), export permits are issued by: Malaysian Quarantine and Inspection Services 
(MAQIS); D epartment of Wildlife and National Parks; Ministry of Domestic Trade, Cooperatives and 
Consumerism; Chief Police Officer; Commissioner of Heritage; Pesticides Board under the 
Department of Agriculture; Director General of the Department of the Atomic Energ y Licensing 
Board; among others. For importation into Sabah and Sarawak, export permits are issued by 
relevant authorities, and inspections and approvals granted by relevant authorities there.   
3.56.   Part II of the Third Schedule lists goods which may not be exp orted from Malaysia except in 
the manner provided for, as they are the goods controlled under the International Trade in 
Endangered Species Act 2008 (Act 686). These include any terrestrial animal, any marine animal, 
any terrestrial plant excluding timber species, and any timber species as specified in the 
appendices of the Third Schedule of the International Trade in Endangered Species Act 2008 
(Act 686). For exportation from peninsula Malaysia and Labuan, an export permit is required. The 
permit is issued  by: Department of Wildlife and National Parks Peninsular Malaysia, Department of 
Fisheries Malaysia, Department of Agriculture Malaysia, and the Malaysian Timber Industry Board, 
respectively.  
3.2.4   Export support  and promotion  
3.2.4.1   Export support  
3.57.   Malaysia  provided support in the form of statutory income tax exemption to exporters based 
on the value of increased exports:  
a. Manufacturing companies or companies engaged in the production of fresh and dried 
fruits, fresh and dried flowers, ornamental plants, and ornamental fish benefited from a 
tax exemption on their statutory income equivalent to 10% of the value of increased 
exports.  
b. Manufacturing companies were eligible for tax exemption on statutory income equivalent 
to 10% or 15% of the value of increased ex ports, provided that the goods exported 
attained at least 30% or 50% value -added, respectively.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  c. Locally owned manufacturing companies with Malaysian equity of at least 60% were 
eligible for tax exemption on statutory income equivalent to 30% of the value of 
increased exports, provided that the company achieved a significant increase in exports; 
this rate was raised to 50% in case the company succeeded in penetrating new markets, 
and to full tax exemption if it achieved the highest increase in export in its  category.  
d. Exemption on 70% of statutory income tax equivalent to 50% of the value of increased 
exports was given to companies in selected services sectors, i.e. legal, accounting, 
architecture, marketing, business consultancy, construction management, bu ilding 
management, office services, healthcare, education, plantation, management, 
publishing, information and communication technology, engineering, printing, and local 
franchise.  
3.2.4.2   Tariff and tax concessions  
3.58.   As during the previous review period, tariff dra wbacks were granted in respect of imports of 
raw materials and components used for the manufacture of approved products for export. 
Imported goods re -exported within 12 months of the day import tariffs were paid are granted a 
drawback of up to 100%, subjec t to the Customs Act 1967.  
3.2.4.3   Free trade zones and other measures  
3.59.   In 2017, there were 21 free industrial zones (FIZs) and 18 free commercial zones (FCZs) in 
Malaysia. They were set up to facilitate operations of export -oriented companies.  
3.60.   For companies to be  located in FIZs, and for them to benefit from import duty and other tax 
reductions or exemptions, they must fulfil the following requirements:  
a. To be located in a FIZ, a company must export at least 80% of its output; a company 
may obtain approval from th e National Investment Committee in MITI and Customs to 
reduce its export performance requirement to 60%.  
b. FIZ companies benefit from import duty exemptions if they achieve 40% of local content 
value; when the local content value does not reach 40%, the comp any may still benefit 
from import duty exemptions if it can prove that the non -originating raw material had 
undergone substantive transformation in producing the end products.  
3.61.   Prior to 1 April 2015, any goods, from overseas or within Malaysia, and services  of any 
description, except those prohibited by law, may be brought into, produced or provided in the 
zones without payment of any tariffs, excises, sales or service taxes. On 1 April 2015, GST was 
introduced, and is payable on the goods imported into a FI Z, although it is not chargeable on the 
supply and removal of goods made within and between free zones. Effective from 1 July 2017, the 
supply of prescribed services by a company operating in a free zone, directly in connection with 
goods for export, is ex empted from GST if these services fall entirely within the business capacity 
and the goods are exported within 60 days upon completion of the services. The prescribed 
services include: manufacturing services; building construction and modification services  to ships 
and aircrafts; maintenance, repair and overhaul activities of floating structure; services to install, 
repair, clean, restore, and modify the goods; blending homogenizing, heating, and other related 
activities in the oil and gas industry.  
3.62.   Export ers operating in licensed manufacturing warehouses (LMWs) may benefit from the 
same benefits as those operating within a FIZ. In 2017, 2,096 companies were operating in LMWs.  
3.2.4.4   Export promotion  
3.63.   The agency responsible for export promotion activities remains the Malaysian External Trade 
Development Corporation (MATRADE) under MITI. Its core services include:  
a. Exporter development – training programmes, Export Excellence Awards, and client 
services, to equip Malaysian companies with knowledge and skills to meet  the challenges 
in global trade;  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  b. Export promotion – participation in trade missions, specialized marketing missions, 
international trade fairs, and business matching programmes. Being the national agency 
for trade promotion, MATRADE is often the reference point for enquiries and visits by 
foreign importers. The agency's role is to match them with compatible local partners who 
can offer the products and services they seek;  
c. Trade and market information – dissemination of timely and relevant information as wel l 
as market intelligence, to give Malaysian companies the competitive edge in 
international trade;  
d. Trade advisory and support – providing general, market and product advisory services.14 
3.64.   MATRADE has been providing grants to exporters:  
a. The Market Developmen t Grant (MDG),15 a financial support facility, was suspended from 
1 April 2017. The MDG provided up to RM 200,000 per company in the form of 
reimbursable grants, to assist small and medium -sized enterprises (SMEs), service 
providers, trade and industry asso ciations, chambers of commerce and professional 
bodies, to undertake export promotion activities. According to its guidelines, companies 
with government equity and government -linked companies were excluded from this 
grant. To be eligible, SMEs must be inco rporated in Malaysia and have at least 60% 
equity owned by Malaysians.  
b. The Service Export Fund (SEF) provides assistance to Malaysian service providers to 
expand and venture into the international market. This assistance is in the form of a 
reimbursable g rant and soft loans, and for the period 2015 -20 amounts to up to 
RM 3 million per company (grant), and RM  5 million per company (soft loan).16 All 
services sectors are eligible to apply, except tourism and financial sectors. All companies 
incorporated in Ma laysia under the Companies Act 1965 are eligible to apply for this fund 
if 60% or more of its equities are owned by Malaysians. Government -linked and majority 
owned companies are excluded from this assistance.  
3.2.5   Export finance , insurance, and guarantees  
3.65.   Export-Import Bank of Malaysia Berhad (MEXIM), a development financial institution, is 
responsible for promoting investment and the export of goods and services from Malaysia as well 
as facilitating  the entry of Malaysian companies into new markets, particula rly to the non -
traditional market. MEXIM is a wholly owned subsidiary of the Minister of Finance Incorporated. 
Current facilities offered by MEXIM include: conventional and Islamic banking facilities 
(cross -border financing, trade finance, and guarantees);  insurance and takaful (short -/medium -
/long-term insurance). Rates fixed to lending are subject to credit assessment, and mainly charged 
at cost of fund plus an added spread.  
3.66.   MEXIM's total assets were RM 15.9  billion in 2016, up by 8% from 2015. Total dis bursement 
grew to RM  10.35 billion, up by 14.3% from 2015. Total gross loans and financing assets closed at 
RM 13.1 billion by the end of 2016, up by 7% from 2015.17 
                                                
14 MARTRADE online information. Viewed at: http://www.matrade.gov.my/en/about -matrade/corporate -
info/background/our -core-services  [04/07/17].  
15 MARTRADE online information. Viewed at: http://www.matrade.gov.my/en/ma laysian -
exporters/services -for-exporters/exporters -development/market -development -grant -mdg [04/07/17].  
16 MARTRADE online information. Viewed at: http://www.matrade.gov.my/en/malaysian -
exporters/services -for-exporters/exporters -development/services -export -fund-sef [04/07/17].  
17 MEXIM (2016), Annual Report 2016 . Viewed at: http://www.exim.com.my/index.php/en/media -
centre/annual -report  [04/07/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.3  Measures Affecting  Production and Trade  
3.3.1   Taxation and incentives  
3.3.1.1   Tax structure  
3.67.   Total tax rea ched RM 169.3 billion in 2016, equivalent to less than 14% of GDP ( Table 
3.14). More than 60% of Malaysia's tax revenues came from direct taxes, although their share 
dropped from 77% in 2013 to 65% in 2016. Among all direct taxes, the share of petroleum income 
tax to total tax revenue declined significantly, from 19% to 5%, reflecting falling oil prices 
internationally.  
Table 3.14 Structure of direct and indirect tax revenue, 2013 -16 
  2013  2014  2015  2016  
Total tax revenue (RM million)  155,952.2  164,204.9  165,440.7  169,343.3  
Share of GDP (%)  15.3 14.8 14.3 13.8 
Direct taxes (% of total tax revenue)  77.3 77.2 67.6 64.7 
Companies income tax  37.3 39.7 38.5 34.4 
Petroleum income tax  19.1 16.4 7.0 5.0 
Individuals income tax  14.8 14.9 15.9 19.5 
Stamp duties  4.1 3.9 3.6 3.4 
Other  2.0 2.2 2.6 2.5 
Indirect taxes (% of total tax revenue)  22.7 22.8 32.4 35.3 
Export duties  1.2 1.2 0.6 0.6 
Import duties  1.6 1.6 1.7 1.7 
Excise duties  7.8 7.9 7.2 6.9 
GST n.a. n.a. 16.3 24.3 
Sales tax  6.5 6.7 3.2 0.1 
Services tax  3.8 3.8 1.8 0.1 
Other  1.8 1.7 1.7 1.6 
n.a. Not applicable.  
Source:  Bank Negara Malaysia online information; and information provided by the authorities.  
3.3.1.1.1   Indirect  taxes  
3.68.   A significant change to Malaysia's tax structure was the implementation of a goods and 
services tax (GST) of 6% from 1 April 2015, to streamline the previ ous consumption taxes. The 
GST replaced the sales tax (levied mainly at 5% and 10% on both local products and imported 
items except those that were to be re -exported), and services tax (levied at 6% on services sold 
or provided by prescribed establishments ).18  
3.69.   GST is levied and charged only if the business is GST -registered. It is mandatory for a 
company to register once it reaches the registration threshold of RM  500,000. A business is not 
liable to be registered if its annual turnover of taxable supplies does not reach a prescribed 
threshold, although it can apply to be registered voluntarily.    
3.70.   GST is zero rated on, inter alia, essential food items such as rice, sugar, meat, fish, chicken, 
vegetables, flour, cooking oil, eggs; livestock supplies such as c ows, goats, poultry; medicaments 
and medical gases in the National Essential Medicines List (NEML); and reading materials such as 
exercise books, children books, and dictionaries. Additionally, the authorities stated that the 
supply of goods or services to  be exported is subject to zero -rated GST.  
3.71.   GST is exempted on: land for residential or agricultural purposes or general use; buildings 
or premises used for residential purposes; investment in precious metals; financial services;  
education services; child care services; healthcare services; and transport services, among 
others.19  
                                                
18 GST online information. Viewed at: http://www.gst.com.my/  [28/07/17].  
19 GST online information, Goods and Services  Tax (Exempt Supply) Order 2014. Viewed at: 
http://www.gst.com.my/pdf/GOODS%20AND%20SERVICES%20TAX%20(EXEMPT%20SUPPLY)%20ORDER%2
02014.pdf  [28/07/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.72.   In the budget speech 2016, the Minister of Finance explained that, contributions from 
Petroliam Nasional Berhad (PETRONAS) vary considerably because of global crude oil prices. When 
crude oil prices averaged US$100 per barrel in 2014, revenue from PETRONAS dividend and 
petroleum tax revenue totalled RM 66.6 billion. When crude oil prices declined to around US$50 
per barrel in 2015, the contribution from PETRONAS and oil -related s ectors were RM 47.2 billion, 
and continued to fall to RM 31 billion in 2016. The collection from GST helped to cover a major 
portion of the shortfall. Based on the Government's calculation, if GST was not implemented and 
the Government had to rely on sales  and services tax as before, government revenue would be 
lower by RM 21 billion, and the fiscal deficit would have increased to 4.8% (not the target of 3.1% 
in 2016).20 
3.73.   According to a study conducted by the OECD, the GST rate at 6% is low by international 
standards. Moreover, the number of exempt or zero -rated items is significant and increasing, 
which reduces compliance and creates distortions. The OECD suggested reducing the number of 
exempt or zero -rated items and strengthening tax enforcement to reduce t ax leakage in the short 
term, and increasing the rate of GST over the medium term.21 The authorities stated that the 
Government has taken efforts to improve the policy and administration of GST since its 
implementation in 2015. One of the efforts taken is t o establish cooperation among government 
agencies in information sharing, auditing, and enforcement. GST policy has also been improved to 
accommodate and facilitate businesses. The Government considers the GST structure in Malaysia 
is not much different fr om other countries, and benchmark studies were conducted before its 
implementation.  
3.74.   Excise duties apply to both imported and locally manufactured goods: motorcars, four -wheel 
drives, motorcycles, intoxicating liquor, and cigarettes:  
a. 10%-105% for motorcars  and electric cars;  
b. 75%-105% for four -wheel -drive vehicles;  
c. 10%-30% for motorcycles and electric motorcycles;  
d. RM 22.50 per 100% volume per litre, and 15% ad valorem  to RM  450 per 100% volume 
per litre for "intoxicating" liquor;  and 
e. RM 0.40 per stick for cigarettes.  
3.75.   Excise duty rates are the same for locally produced and imported goods.  
3.76.   As at the time of the previous Review, individual taxi owners (since 2012) and car -rental 
operators (since 2002) were exempt from excise duties on the purchase of locally produced 
"national cars" while tour operators benefited from a 50% reduction for purchases of locally 
assembled four -wheel -drive cars. The authorities indicated that the measure is partly aimed at 
reducing the cost of car rentals to tourists and reducing t he cost of public transportation, so as to 
spur tourism activity.  
3.77.   The share of import tariffs to total tax revenue remained relatively stable during the review 
period, while the share of export taxes declined by half, from 1.2% in 2013 to 0.6% in 2016. Th is 
is in line with the drop in the number of products subject to export duties (Section 3.2.2).  
3.3.1.1.2   Direct  taxes  
3.78.   Direct taxes account for 65% of total tax revenue in Malaysia. More than half of direct taxes 
come from company income tax, which is a tax on prof its of companies. Companies with paid -up 
capital of up to RM 2.5 million are subject to a company income tax of 18% on taxable income up 
                                                
20 BNM online information, 2016 Budget . Viewed at: 
http://www.bnm.gov.my/files/Budget_Speech_2016.pdf  [05/07/17].  
21 OECD (2016), OECD Economic Surveys – Malaysia , p. 46.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  to RM  500,000, with the excess taxed at 24%. All other companies (resident and non -resident) are 
subject to a company i ncome tax at a rate of 24%.22 
3.79.   About one -fourth of direct tax comes from personal income tax. Resident individuals with 
chargeable income (after deduction of personal reliefs) of more than RM 5,000 per  year are 
subject to personal income tax with rates rangi ng from 1% to 28%. Both resident individuals with 
chargeable income of more than RM 1 million, and non -resident individuals, are subject to a 
personal income tax at a rate of 28%. The top marginal tax rate for very -high-income earners – 
28%, remains well b elow top rates of between 45% and 55% in high -income countries; the OECD 
considers that this provides scope for a further increase to raise revenue while maintaining the 
country's attractiveness to investors and skilled workers.23  
3.80.   The tax on income from up stream petroleum activities (petroleum income tax) applies at a 
rate of 38% (Section 4.3). The share of petroleum income tax to total tax revenue has been 
declining, and accounted for about 5% of total tax revenue in 2016.  
3.3.1.2   Tax incentives   
3.81.   Malaysia continu es to provide tax incentives, both direct and indirect, under the Promotion 
of Investments Act 1986, Income Tax Act 1967, Customs Act 1967, Excise Act 1976, and Free 
Zones Act 1990.24 Direct tax incentives grant partial or total relief from income tax for a  specified 
period, and incentives on indirect taxes are in the form of exemptions from import tariffs, and 
excise duties. GST relief has been given to certain goods under the GST Relief Order 2014.  
3.3.1.2.1   Main incentives   
3.82.   Tax incentives continued to be implement ed mainly through the pioneer status and 
investment tax allowance (ITA) schemes. Eligibility for pioneer status and the ITA is based on: 
level of value -added, technology used, and industrial linkages. Companies engaging in activities 
listed as "promoted ac tivities & products",25 which cover agricultural, manufacturing, hotel and 
tourism, or other industrial or commercial sectors, may be granted "pioneer status", or "ITA" 
incentives ( Table 3.15). Applications are dealt with by the Malaysian Investment Development 
Authority (MIDA).  
3.83.   In 2015 and 2016, pioneer status was granted to 271 company projects involving 
investments of RM  14.7 billion, down from 434 company projects i nvolving investment of 
RM 32.9 billion in 2011 and 2012. The Government granted ITAs to 47 projects involving 
investments of RM  49.1 billion in 2015 and 2016, compared to 50 projects involving investment of 
RM 11.8 billion in 2011 and 2012.  
Table 3.15 Tax incentives  
 Tax incentives  Note  
Pioneer status  5-year partial exemption from company 
income tax: the company pays tax on 30% of 
its statutory income, with the exemption 
period commencing from its production  day Unabsorbed capital allowances and 
accumulated losses incurred during the 
pioneer status period may be carried forward 
and deducted from the post -pioneer income of 
the company  
ITA – investment 
tax allowance  A company granted ITA is entitled to an 
allowance of 60% on its qualifying capital 
expenditure (factory, plant, machinery or 
other equipment used for the approved 
project) incurred within five years from the 
date the first qualifying capital expenditure 
occurred.  The company can offset this allowance against 
70% of its statutory income. Any unutilized 
allowance can be carried forward to 
subsequent years until fully utilized. The 
remaining 30% of its statutory income is 
taxed at the prevailing company tax r ate. 
Source:  MIDA online information.  
                                                
22 MIDA online information. Viewed at: http://www.mida.gov.my/home/taxation/posts/   [06/07/17].  
23 OECD (2016), OECD Economic Surveys – Malaysia, p. 47.  
24 MIDA online information, "Invest in Malaysia". Viewed at: http://www.mida.gov.my/home/incentives -
in-manufacturing -sector/posts/  [07/07/17].  
25 MIDA online information, "List of promoted activities and products which are eligible for consideration 
of pioneer status and investment tax allowance under the Promotio n of Investment Act 1986". Viewed at: 
http://www.mida.gov.my/env3/uploads/images/invest/invest -pdf/APP1_02032012.pdf  [07/07/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.84.   In 2017, Malaysia notified its pioneer status and investment tax allowance programmes to 
the WTO Committee on Subsidies and Countervailing Measures, covering a period between 2014 
and 2017.26 
3.3.1.2.2   More  favourable incentive s  
3.85.   More favourable tax reliefs may be granted to companies engaged in the following 
manufacturing activities: strategic projects of national importance, e.g. heavy capital investment, 
and high -tech projects ; specialized machinery and equipment; automotive industry; and utilization 
of oil palm biomass ( Table 3.16). SMEs and small -scale companies may also obtain more 
favourable incentives. Eligibility criteria include: lo cal R&D expenditure, level of technology as 
measured by a managerial, technical and supervisory (MTS) index , and the level of skill 
development.  
Table 3.16 More favourable tax incentives - manufacturing  
  Tax incentives  Eligibility criteria  
High 
technology 
companies  Pioneer status with income tax exemption 
of 100% of the statutory income for five 
years; or  
ITA of 60% of the qualifying expenditure. 
The allowance can be utilized to offset 
against 100% of the st atutory income  Proposed product/activity must be listed in 
the Promoted Products/Activities for High 
Technology Companies  
The percentage of local R&D expenditure to 
gross sales is at least 1% on an annual 
basis.  
Scientific and technical staff having 
degree s or diplomas with a minimum five 
years' experience in related fields must 
comprise at least 15% of the company's 
total workforce. Value -added must be at 
least 40%.  
Strategic 
projects  Pioneer status with income tax exemption 
of 100% of the statutory income for 10 
years; or  
ITA of 100% of the qualifying expenditure. 
The allowance can be utilized to offset 
against 100% of the statutory income  Products or activities of national 
importance. Generally involve heavy capital 
investment with long gestation pe riods, 
having high level of technology, generating 
extensive linkages, having significant 
impact on the economy.  
SMEs  A reduced company income tax of 20% on 
chargeable income of up to RM 500,000  Companies resident in Malaysia with a paid 
up capital of ordinary shares of RM 2.5 
million or less, and such companies cannot 
be controlled by another company with a 
paid up capital exceeding RM 2.5 million.  
Small -scale 
companies  Pioneer status with income tax exemption 
of 100% of the statutory income for five 
years; or  
ITA of 60% of the qualifying expenditure. 
The allowance can be utilized to offset 
against 100% of the statutory income  Companies incorporated in Malaysia with 
shareholders' fund not exceeding RM 2.5 
million, and having 60% - 100% Malaysian 
equity . 
Specialized 
machinery and 
equipment  Pioneer status with income tax exemption 
of 100% of the statutory income for 10 
years; or  
ITA of 100% of the qualifying expenditure. 
The allowance can be utilized to offset 
against 100% of the statutory income  Value added must be at least 40%; and 
percentage of managerial, technical and 
supervisory staff (MTS Index) to total 
workforce must be at least 25%.  
Automotive 
industry    
- Critical and high 
value -added 
parts and 
components and 
production  Pioneer status with income tax exemption 
of 100% of the statutory income for 10 
years; or  
ITA of 100% of the qualifying expenditure 
for 5 years. The allowance can be utilized 
to offset against 100% of the statutory 
income  Companies manufacturing transmission 
systems, brake sy stems, airbag systems, 
and steering systems . 
- Hybrid and 
electric vehicles 
and related 
infrastructure  100% ITA or pioneer status for 10 years;  
Customized training and R&D grants in 
addition to the existing grants;  
50% exemption on excise duty for locally  
assembled/manufactured vehicles or  
                                                
26 WTO documents, G/SCM/N/315/MYS , G/SCM/N/284/MYS, 9 October 2017.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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    Tax incentives  Eligibility criteria  
provision of grant under the Industrial 
Adjustment Fund;  
100% pioneer status for 10 years or ITA of 
100% for 5 years, for the manufacturing of 
selected critical components supporting 
hybrid and electric vehicles  
Utilization of oil 
palm biomass  Pioneer status with income tax exemption 
of 100% of the statutory income for 10 
years; or  
ITA of 100% of the qualifying expenditure. 
The allowance can be utilized to offset 
against 100% of the statutory income  Value added mu st be at least 60%; MTS 
staff ratio must be at least 25% . 
Source:  MIDA online information, "Invest in Malaysia". Viewed at: 
http://www.mida.gov.my/home/manufacturing -sector/posts/  [07/07/17].  
3.86.   Similarly, more favourable incentives are given to companies engaged in certain services 
activities, such as: the hotel and tourism projects; Mines Wellness City (MWC) 
developers/managers/operators; environmental management; establishment of w aste eco parks; 
research and development ; training; promotion of healthcare travel; integrated logistics services; 
cold chain facilities; gas and radiation sterilization services; principal hubs; industrial design 
services; and industrial area management. Companies providing services in less developed areas 
are also eligible for these more favourable incentives.27 
3.3.1.2.3   Incentives  on indirect  taxes  
3.87.   In addition to direct tax incentives such as company income tax reductions or exemptions,  
incentives on indirect taxe s may take the form of reductions or exemptions from import tariffs, 
and excise duties.  
3.88.   Import tariff exemptions may be considered for raw materials/components, regardless of 
whether the finished products are meant for the export or domestic market. If th e finished 
products are for the domestic market, full exemption from import duty on raw materials and 
components that are not produced locally may be considered. Import duty exemption is given to 
medical devices that are imported for the purpose of kitting  or producing complete procedural 
sets, provided that these medical devices are not manufactured locally. Import tariff exemption is 
also given to machinery and equipment used directly in the manufacturing process and not 
produced locally.  
3.89.   Companies in man ufacturing, agriculture and listed services activities may be considered for 
import duty exemption for raw materials, components, and machinery and equipment. Aerospace 
companies undertaking maintenance, repair and overhaul activities (MRO) are eligible fo r import 
duty exemption on raw materials, components, machinery and equipment, spares and 
consumables. Effective 1 January 2016, a company undertaking aerospace MRO activities, once 
approved under the Approved Trade Scheme (ATS), is entitled to GST relief.   
3.3.1.3   Other support measures, and SMEs  
3.90.   Support in various forms has been provided at the sectoral level to, inter alia,  agriculture, 
energy, manufacturing , and services (Section 4). In 2014, the Government removed the fuel 
subsidies (i.e. petrol and diesel), a s well as subsidies on sugar. However, subsidies for liquefied 
petroleum gas (LPG) and diesel for fisheries and public transport sectors were maintained 
(Section  4.3).  
3.91.   Malaysia has been providing funds to encourage R&D, promote SMEs, and boost the 
product ion and use of green technology, among others. The Domestic Investment Strategic Fund 
aims at leveraging outsourcing activities and acquisition of technology by companies in certain 
priority sectors (e.g. aerospace, medical devices, pharmaceuticals, advanc ed electronics, 
machinery and equipment, renewable energy, and related services); these companies must be at 
                                                
27 MIDA online information, Incentives for the Services Sector . Viewed at: 
http://www.mida.gov.my/home/incentives -in-services -sector/posts/  [31/07/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  least 60% Malaysian owned. The Strategic Investment Fund and the High Impact Project Fund 
have been providing grants and soft loans to the manufact uring sector.  
3.92.   The Green Technology Financing Scheme, whose application period was extended to the end 
of 2017 and funding increased to RM  3.5 billion, provided soft loans to boost the production and 
use of green technology. The Government subsidized 2% of the interest rate under this scheme, 
and provided a guarantee of 60% on the amount of financing. The objective is to support green -
technology -based projects in obtaining financial assistance from the financial institutions.  
3.93.   Based on the 2016 Economic Cens us, SMEs accounted for 98.5% of total business 
establishments in Malaysia. The SME Masterplan 2012 -2020 aimed at raising SMEs' contribution to 
GDP from 32.7% in 2012 to 41% by 2020, their share of employment from 59% in 2010 to 65% 
in 2020, and their share  in total exports from 19% to 23% during the same period. In 2016, their 
contribution to GDP was 36.6%, share of employment reached 65.3%, and exports accounted for 
18.6% of total exports.  
3.94.   Various forms of support have been provided to SMEs, to facilitate  their access to financing, 
develop human capital, improve infrastructure, promote innovation and technology adoption, and 
increase market access. In addition to tax incentives, export support has been provided to SMEs 
(Section 3.2.4.4), and they have been  permitted to deduct their patent and trademark registration 
costs from company income tax (Section 3.3.7). SMEs are also eligible for different forms of funds, 
and soft loans:  
a. The Central Bank's Fund for Small and Medium Industries 2 (FSMI2), and the New 
Entrepreneur Fund 2 (NEF2). Both funds were channelled through financial institutions to 
SMEs as soft loans at rates ranging from 4% to 6%.  
b. Financing provided by SME Bank to micro enterprises through various financing 
programmes, including through loans to  SMEs at interest rates (or profit margins for 
Islamic products) ranging from 4% to 8.85%.  
c. A RM 10 billion fund under the Working Capital Guarantee Scheme for SMEs, to facilitate 
their access to working capital: the scheme guarantees up to a maximum of 70%  of the 
loan. As the cap of the loan is RM 5 million, the scheme guarantees up to RM 3.5 million 
to qualified companies.  
3.95.   Other funding allocations are:  
a. Special funding allocations for seed capital if they are at least 51% Malaysian owned;  
and 
b. The Global Te chnology Fund (GTF), which aims at building local technology champions, 
promoting foreign investment and improving the digital innovation eco -system, offers up 
to 50% funding to total costs of a project, or RM  2 million, whichever is lower.  
3.3.2   Standards and other technical requirements  
3.96.   Since the previous Review in 2014, there has not been any major change to the institutional 
and legislative framework regarding standards. The Standards of Malaysia Act 1996 (Act 549), 
most recently amended in 2012, is the law governing matters relating to standardization and 
accreditation activities in Malaysia. The Act established the Department of Standards Malaysia 
(Standards Malaysia, or DSM), under the Ministry of Science, Technology and Innovation, as 
Malaysia's national standardization and accreditation body. Standards Malaysia is responsible for 
implementing the standards component of the Strategic Reform Initiatives – Competition 
Standards & Liberalization (SRI – CSL) under the Economic Transformation Programme, to 
enhance the quality of Malaysian products and services.28  
                                                
28 The Competition, Standards and Liberalization (CSL) Strategic Reform Initiative (SRI) seeks to 
develop an efficient and competitive business environment and culture that support Malaysia’s goal of 
becoming a high -income nation by 2020.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.97.   The Act additionally established a Standards and Accreditation Council (MSAC) as the 
advisory body on standardization and accreditation to the Minister of Science, Technology and 
Innovation. The Council  established four advisory committees on standardization and 
accreditation: the National Standards Committee (MyNSC), the National IEC Committee (MyENC), 
the National Accreditation Committee (NAC), and the National Good Laboratory Practice 
Committee (My GL PC). Standards Malaysia also established sector -based industry standards 
committees (ISC) to oversee the technical work related to standardization for the specific sectors.  
3.98.   Standards Malaysia has appointed SIRIM Berhad, a wholly state -owned company, to 
coordinate standards development activities in Malaysia, and to represent Malaysia in international 
standardization activities. Amendment of Act 549 allowed Standards Malaysia to appoint more 
standards development agencies (SDAs), apart from SIRIM Berhad, to expedite the development 
of Malaysian Standards.  
3.99.   Except those referred to in legislation, Malaysian standards (MS) are voluntary. By 
30 June 2017, there were 5,284 MS (6,381 in 2012) in place. The authorities stated that this 
reflected its effort to focus on establishing standards with high impact on the public including 
Malaysian industries, rather than focusing on the number of standards. The main product 
categories were chemicals and materials (12.3%); power generation, transmission and distribution 
(8.4%); electrical and electronics equipment and accessories (6.9%); food and food products 
(6.7%); buildings, construction and civil engineering (6.6%); and medical devices and facilities for 
healthcare (6.2%).29  
3.100.   The Government continues to make efforts to al ign Malaysian standards with international 
standards. As of 30 June 2017, 60% of MS were aligned with international standards (59.8% in 
2014), and 54% were identical (57.5% in 2014). The highest levels of alignment were in electrical 
and electronics equipm ent and accessories; power generation, transmission and distribution; 
medical devices and facilities for healthcare; and chemicals and materials.  
3.101.   As of February 2017, 510 or 9.7% (6.5% at end 2012) of all MS were compulsory.30 The 
main categories of product s with compulsory standards are electrical products, building and 
construction materials.  
3.102.   The Government aims to make Malaysia a hub for halal food products. All meat, processed 
meat products, poultry, and egg products, domestically produced or imported, must receive halal 
certification from the Department of Islamic Development Malaysia (JAKIM) or any foreign halal 
certification body recognized by JAKIM prior to importation and distribution in Malaysia. Other than 
swine, the slaughtering of animals and pr oduction of animal -based products for export to Malaysia 
must be conducted according to halal requirements. The Department of Veterinary Services (DVS), 
in collaboration with JAKIM, inspects slaughterhouses and processing plants overseas periodically, 
to ensure compliance with Malaysia's import requirements.  
3.103.   Standards Malaysia remains Malaysia's only national accreditation body. It gives official 
recognition in the form of accreditation to organizations with established competence to provide 
conformity asse ssment services for the certification of management systems (e.g. certification of 
quality management systems according to ISO 9001 and certification of environmental 
management systems according to ISO 14001), product certification, testing, calibration, and 
inspection. It operates four categories of accreditation schemes, as well as the Good Laboratory 
Practice Compliance Programme based on the OECD principles ( Table 3.17). According to 
Standards Malaysia's online information, its accreditation system is in accordance with 
international standards – MS ISO/IEC 17011 – to ensure that the accreditation services provided 
are impartial, non -discriminatory, and credible.31  
                                                
29 Stand ards Malaysia online information, Standards – MS status . Viewed at: 
http://www.jsm.gov.my/ms -status#.WWNQEIR94dU  [10/07/17].  
30 Standards Malaysia online information, Summary of MS Mandatory as of Feb 2017 . Viewed at: 
http://www.jsm.gov.my/ms -implementation#.WWNSaIR94dU  [10/07/17).  
31 Standards Malaysia online information, Accreditation Overview . Viewed at: 
http://www.jsm.gov.my/accreditation -overview#.WWONbIR94dU   [10/07/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 3.17 Accreditation  
   
Laboratory Accreditation Scheme of Malaysia 
(SAMM)  Accreditation scheme of both testing and calibration 
laboratories  
Accreditation of Certification Bodies (ACB)  Accreditation scheme for certification bodies operating 
Management System Certification and Product 
Certification (including Halal products certification)  
Malaysia Inspection Bodies Accreditation 
Scheme (MIBAS)  A unified national inspection bodies accreditation scheme,  
multi-disciplinary in its scope  
Malaysia Proficiency Testing Accreditation 
Scheme (MyPTP)  Accreditation scheme for proficiency testing providers  
Good Laboratory Practice Compliance 
Programme (GLP CP)  A compliance programme for Good Laboratory Practice 
based on OECD GLP  
Source:  Information provided by the authorities.  
3.104.   Malaysia participates in the activities of the International Organization for Standardization 
(ISO) and the International Electrotechnical Commission (IEC).32 Malaysia, through Standards 
Malaysia, is a signatory to various regional and international arrangements: such as the Asia 
Pacific Laboratory Accreditation Cooperation MRA (APLAC MRA), the Pacific Accreditation 
Cooperation MRA (PAC MRA), the International Laboratory Accreditation Cooperation MRA (ILAC 
MRA), and the International Accreditation Forum MRA (IAF MRA). There are a number of 
accreditation schemes, including the Accreditation of Certification Bodies Scheme; Malaysia 
Inspection Bodies Accreditation Scheme; the Good Laboratory Practice Compliance Programme; 
and the Laboratory Accreditation Scheme of Malaysia.  
3.105.   The procedure for developing standards remains the same as at the time of the previous 
Review. Foreign interests are considered in the adoption  of new or revised standards through the 
"public comment" procedures on draft standards, which are accessible on the Standards Malaysia 
and SIRIM Berhad websites.  
3.106.   Malaysia made 44 notifications of technical regulations to the WTO between January 2014 
and 12 October 2017.33 The agencies with the largest number of notifications were: the Food 
Safety and Quality Division under the Ministry of Health (19 notifications), Ministry of Domestic 
Trade, Cooperatives and Consumerism (6), Malaysian Communications and M ultimedia 
Commission (8), Energy Commission (3), Ministry of Transport (3), MITI (2), National 
Pharmaceutical Control Bureau (2), and the Ministry of Plantation Industries and Commodities (1).  
3.107.   Products notified cover: food; alcoholic beverages and liquor; communications equipment; 
electronic products; pharmaceutical products; parts and accessories of vehicles; iron, steel and 
aluminium products; wood; salt; toys; pre -packaged products; and generic products. In almost all 
notifications, the period for commen t was 60 days.34  
3.3.3   Sanitary and phytosanitary requirements  
3.108.   Both the legislative and institutional framework on SPS measures has remained largely 
unchanged since the previous Review in 2014.35 The relevant laws and regulations include: the 
Malaysian Quarantine  and Inspection Services Act 2011 (effective in 2012); the Plant Quarantine 
Act 1976; the Plant Quarantine Regulations 1981; the Animal Act 1953 (Revised 2006); the 
Fisheries Act 1985; the Biosafety Act 2007; the Food Act 1983; the Food Regulations 1985; a nd 
the Food Hygiene Regulations 2009. In particular, the Food Regulations 1985 were amended a few 
times, to harmonize the food additive provisions with the Codex Standard, and to reflect probiotic 
cultures.  
                                                
32 Malaysia participates in the Council, Technical Management Board, and various technical committees 
and sub -committees of ISO, and various technical committees and sub -committees of the IEC.  
33 WTO documents G/TBT/N/MYS/37 -77, G/TBT/N/MYS/15/Rev.2 –Rev.3, G/TBT/N/MYS/36/Rev.1, 
excluding notifications contained in documents with the symbols "Add" and/or "Corr".  
34 In one notif ication made in 2014 regarding toys, the comment period was defined as 90 days 
(G/TBT/N/MYS/15/Rev.2).  
35 WTO document, WT/TPR/S/292/Rev.2, 8 April 2014.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.109.   Since 2014, there have not been any changes to S PS-related matters concerning the 
importation of animals and animal products, plants and plant products, food, LMOs and GMOs, 
among others. Their importers must obtain an import licence or permit on SPS grounds 
(Section  3.1.5. 2.2). Relevant agencies issue import licences or permits in accordance with the 
relevant legislation. The Ministry of Agriculture and Agro -Based Industry's (MOA) Department of 
Agriculture (DOA), Department of Veterinary Services (DVS), and Department of Fisheries (DOF) 
are responsible for matters relating to plants, animals and animal products, and fisheries, 
respectively. The Ministry of Health (MOH), through its Food Safety and Quality Division, is 
responsible for food safety matters including inspection and enforcement related matter s. The 
Malaysian Quarantine and Inspection Services (MAQIS), which operates as a one -stop centre, 
provides quarantine services and certification for imports and exports, as well as inspection of and 
enforcement relating to food and relevant matters.  
3.110.   Betwe en January 2014 and 12 October 2017, 14 notifications were submitted under the 
WTO Agreement on Sanitary and Phytosanitary Measures. Most notifications (9) were submitted by 
the Food Safety and Quality Division under the MOH, covering inter alia food, pest icide residues, 
flour, infant formula for medical purposes, fish, and raw cleaned edible birdnest. Four notifications 
were made by the Plant Biosecurity Division under the Department of Agriculture. Products 
concerned were: plants and plant products, inclu ding fresh fruits of mangosteen, betel leaves, 
chilies, and durian.36 The objectives of these SPS measures were food safety or plant protection 
related. One notification was made by the Department of Fisheries, concerning temporary 
emergency measures for th e importation of live tilapia fish (from 24 July 2017 for a period of six 
months).   
3.111.   In the context of the WTO Committee on Sanitary and Phytosanitary Measures, during the 
review period (2014 -17), there was one concern raised by Brazil on Malaysia's import restrictions 
related to the approval of poultry meat export plants.37 In July 2015, Brazil raised its concern 
regarding Malaysia's delay in approving Brazilian poultry meat export plants, and the lack of 
definition of the applicable international sanitary c ertification. Malaysia replied that, following an 
inspection result, one export plant was approved while the other three were rejected as they failed 
to comply with the Malaysian halal standard.  
3.112.   Malaysia is a member of the Codex Alimentarius Commission, th e World  Organisation for 
Animal Health (OIE), and a contracting party to the International Plant Protection Convention 
(IPPC).   
3.113.   In accordance with the Biosafety Act 2007, the National Biosafety Board (NBB) evaluates 
and approves living modified organisms ( LMOs) and issues approval certificates before releasing 
them to the market. The Genetic Modification Advisory Committee (GMAC) provides advice to the 
NBB. Currently, most of the approved applications by the NBB are for LMO in or for food, feed and 
processi ng (FFP). Importers must obtain approval from the Ministry of Agriculture and Agro -Based 
Industry for imported seeds regardless of whether they are conventional or GM seeds.  
3.114.   Mandatory labelling requirements for food and food ingredients obtained through m odern 
biotechnology were stipulated in the Food Regulations 1985 which were gazetted in 2010. A 
four-year grace period was given, and it was enforced on 9 July 2014.  
3.3.4   Competition policy and price controls  
3.3.4.1   Competition  policy  
3.3.4.1.1   Legal framework  
3.115.   Malaysia's Comp etition Act was introduced in 2010 and came into force on 1 January 2012. 
Its competition authority, the Malaysia Competition Commission (MyCC), was established in 2011. 
Since the previous TPR of Malaysia in 2014, there have been no major changes to the le gal and 
institutional framework governing competition policy except the publication of several new 
implementation guidelines issued by the MyCC.  
                                                
36 WTO documents, G/SPS/N/MYS/27 –40. 
37 WTO online information. Viewed at: http://spsims.wto.org/en/SpecificTradeConcerns/View/391  
[13//07/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.116.   The Competition Act 2010 addresses two types of competition issues: anti -competitive 
agreements, and the abuse of dominant market positions. It covers all commercial activities, both 
within and outside Malaysia, that have negative or anti -competitive effects in relevant markets in 
Malaysia. It prohibits any anti -competitive agreements, either horizontal or vertical , in particular 
hard-core cartels, such as agreements for price fixing, sharing markets, controlling production and 
bid rigging. The Act also sets out examples of conduct that may amount to an abuse of dominance 
and are therefore prohibited: price discrimi nation, predatory behaviour such as using below cost 
pricing to eliminate competition, refusing to supply, tied selling, and buying up scarce goods or 
resources required by a competitor but not needed for its own use.  
3.117.   Malaysia is the only country in ASEAN  with a competition law that does not provide for 
merger and acquisition control. An economic survey conducted by the OECD in 2016 therefore 
suggests that the coverage of the Act should broaden to include merger control.38 Currently, 
Malaysia has no plans t o introduce any amendments to the Act.    
3.118.   The Act does not apply to activities that involve an exercise of governmental authority or 
are carried out pursuant to the principle of "solidarity" or to the purchase of goods or services not 
intended for resale or  resupply. The principle of solidarity covers activities for purely social 
objectives, e.g. the provision of medical care by the Government. The Act also exempts certain 
sectors from the scope of its application, noticeably the communications and multimedi a sectors, 
the electricity and piped gas industries, and the aviation sector, which are governed by separate 
sectoral regulations respectively39 However, the lack of consistency on key concepts of competition 
between the Competition Act and relevant sectora l acts, and the lack of any evidence of 
enforcement of competition policy by sectoral regulators have constrained the effectiveness of the 
competition policy regime in the country.40 Efforts are under way to improve collaboration and 
consistency. For exampl e, the MyCC holds a Special Committee Meeting on Competition with 
sector regulators twice a year to discuss and review competition issues with a view to ensuring 
that their policies are consistent with the Act.41 Since 11 May 2017, the MyCC has also been 
conducting an online consultation on the Proposed Block Exemption for Vessel Sharing Agreements 
and Voluntary Discussion Agreements in Respect of Liner Shipping Services.  
3.119.   The Act also sets out exceptions for many types of hard -core cartels for SMEs, even if  they 
are competitors. Specifically, it stipulates that when the combined market share of relevant SMEs 
is below 20%, their agreements would be exempted from investigation as they are unlikely to 
have an anti -competitive effect. These types of agreements m ay include joint purchasing, 
exclusive distribution or tying. These agreements are not permitted if they are between a large 
enterprise and an SME since the effect on the market may be greater.  
3.3.4.1.2   Institutional  framework and enforcement  
3.120.   The MyCC is the only authority empowered to implement and enforce the provisions of the 
Competition Act 2010, carrying out functions such as: investigating alleged infringements; issuing 
guidelines on the enforcement of the Act; acting as advocate for competition matters; cond ucting 
general studies on competition -related issues or studies on particular sectors of the Malaysian 
economy; and informing and educating the public regarding the ways in which competition may 
benefit consumers.  
3.121.   Since the entry into force of the Competi tion Act in 2012, the MyCC has issued six 
Guidelines, namely, Guidelines on Complaints Procedures (2 May 2012), on Market Definition 
(2 May 2012), on Anti -competitive Agreements (2 May 2012), on Abuse of Dominant Position 
                                                
38 OECD, OECD Economic Surveys: Malaysia 2016 . Viewed at: 
https://www.oecd.org/eco/surveys/Malaysia -2016-OECD -economic -survey -overview.pdf . 
39 The communications and multimedia sectors are governed by the Communications and Multimedia 
Act 1998, the energy sector by the Energy Commission Act 2001, and the aviation industry by the Civil 
Aviation (Amendment) Act 2015, respectively.  
40 OECD, OECD Economic Surveys: Malaysia 2016 . Viewed at: 
https://www.oecd.org/eco/s urveys/Malaysia -2016-OECD -economic -survey -overview.pdf . 
41 The sector regulators involved are: (i) Central Bank of Malaysia (BNM); (ii) Malaysia Communications 
and Multimedia Commission (MCMC); (iii) Land and Public Transport Commission (SPAD); (iv) Securit ies 
Commission Malaysia (SC); (v) Energy Commission (EC); (vi) National Water Services Commission (SPAN); 
(vii) Malaysian Aviation Commission (MAVCOM); and (viii) Intellectual Property Corporation of Malaysia 
(MyIPO).  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  (26 July 2012), on Financial Penal ties (14 October 2014), and on the Leniency Regime 
(14 October  2014). The Guidelines on the Abuse of Dominant Position stipulate that a market 
share of above 60% is a strong indicator, although not the only indicator, that the business holds a 
dominant pos ition. It is currently drafting the Guidelines on the Treatment of Intellectual Property 
and plans to conduct a series of public consultations on the draft with stakeholders and through 
the MyCC's website in early 2018.42 
3.122.   The increasing number of complaints  received by the MyCC reflects the rising awareness of 
the Competition Act among consumers and the business community. The total number of 
complaints received grew from 8 in 2012 to 75 in 2015, and 51 in 2016. Of these, 48 related to 
anti-competitive agree ments, and 20 to the abuse of market dominant positions. The sectors 
concerned were: petroleum sales and services, medical services, government services, 
government procurement, public transportation, auto accessories, livestock, information 
technology, to urism and insurance. The MyCC has concluded a total of 19 anti -competitive  
investigations, among which, five infringements were found ( Table 3.18). The infringements 
mainly concerned anti -competitive agreements in the form of price fixing.  
Table 3.18 Number of complaints, investigations and findings, 2014 -16 
 2014  2015  2016  
Number of complaints  80 75 51 
Number of investigations  3 10 6 
Number of infringements  1 2 2 
Number of non -infringements  0 6 1 
Source:  Information provided by the authorities.  
3.123.   The Competition Appeal Tribunal was established in 2012 to hear appeals against decisions 
made by the MyCC. For instance, in 2014, one decision made by the MyCC concerning the 
Malaysian Airline System and AirAsia was brought to the Competition Appeal Tribunal. The Tribunal 
found that the relevant companies' conduct had not infringed the Competition Act. Three appeal s 
have been made since 2014.  
3.124.   Any enterprise found infringing the Act will face a potential fine of up to 10% of its 
worldwide turnover. A leniency regime is available for cases where an enterprise has admitted its 
involvement in an infringement of any proh ibition of horizontal agreement and provided 
information or another form of cooperation to the MyCC (as recommended by various international 
organizations). This can significantly assist the investigation. The leniency regime would lead to a 
reduction of u p to a maximum of 100% of any penalties which would otherwise have been 
imposed, but does not include any other legal consequences of civil proceedings.  
3.125.   In addition to infringement investigation, competition advocacy and capacity -building were 
also the fo cus of the MyCC's work in the past few years. It organized 31, 48 and 28 advocacy  
programmes, in 2014, 2015 and 2016, respectively, involving private and public sectors 
nationwide.  
3.126.   Nonetheless, there continues to be doubts about the effectiveness of the re gime. The 
autonomy and independence of MyCC and the role and involvement of Ministry of Domestic Trade, 
Cooperatives  and Consumerism, which determines the MyCC's budget, are a concern for the 
OECD, which has pointed out that the MyCC has less than desirabl e expertise and employs too few 
experienced economists. 43 It recommends that the MyCC intensify its enforcement activities to 
achieve effective deterrence, increase awareness and build stakeholder confidence.  
3.3.4.1.3   International cooperation  
3.127.   Some bilateral/region al free trade agreements, such as the Japan –Malaysia Economic 
Partnership Agreement, the ASEAN –Australia –New Zealand Free Trade Agreement, the 
Malaysia -New Zealand FTA, and the Malaysia –Australia FTA, include provisions on competition.44 
                                                
42 The Malaysia Competition Commission' s website is: www.mycc.gov.my . 
43 OECD, OECD Economic Surveys: Malaysia 2016 . Viewed at: 
https://www.oecd.org/eco/surveys/Malaysia -2016-OECD -economic -survey -overview.pdf . 
44 The Trans -Pacific Partnership (TPP) also contains provisions on competition.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  The MyCC became a  member of the International Competition Network (ICN) in June 2011 and 
participates in its events regularly. At the regional level, Malaysia participates in the ASEAN 
Experts Group on Competition (AEGC) and the annual ASEAN  Competition Conference (ACC), 
which aim to develop capacity and a forum for discussion on competition policies in the region. It 
successfully hosted the 7th ASEAN Competition Conference on 8 and 9 March 2017.  
3.3.4.2   Price and supply  controls  
3.128.   In accordance with the Control of Supplies Act 1961,  general purpose flour and cooking oil 
are subsidized and subject  to ceiling prices set by the Government.45 The authorities indicated that 
liquefied petroleum gas (LPG) is also a subsidy product.   
3.129.   Under the Price Control and Anti -Profiteering Act 2011, the  MDTCC (Ministry of Domestic 
Trade, Cooperatives and Consumerism) set maximum prices for manufacturing, producing, 
wholesaling or retailing certain goods and services including essential goods, which are basic 
necessities for daily consumption. Once specif ic goods are declared as price -controlled goods with 
a fixed maximum price, any person who sells these goods at a higher price commits an offence 
under the Price Control and Anti-Profiteering Act. There are two types of price controls: price 
controls throu ghout the year (on petrol, diesel, LPG, face masks, and sugar); and seasonal price 
controls (on chicken, eggs, fish, prawns, onions and vegetables, before/during/after a festival).  
3.3.5   State trading, government -linked  enterprises, and privatization  
3.3.5.1   State tradi ng 
3.130.   Malaysia notified to the WTO that within the meaning of Article XVII:4(a) of GATT  1994, 
Padiberas Nasional Berhad (BERNAS) acts as a state trading enterprise for rice importation.46 
3.131.   BERNAS carries out non -commercial activities on behalf of the Government , such as:  
a. conserving, maintaining and managing the national paddy/rice stockpile;  
b. purchasing paddy from paddy farmers at the guaranteed minimum price as determined 
by the Government from time to time;  
c. acting as the buyer of last resort for paddy farmers;  
d. managing the disbursement of subsidies to paddy farmers under the Paddy Price Subsidy 
Scheme; and  
e. managing the Bumiputera  Rice Millers Schemes.  
3.132.   BERNAS also conducts commercial activities, such as paddy seed production, paddy 
farming, paddy procurement and  rice processing, distribution and trading of rice and its products, 
and rice importation.  
3.133.   Through its privatization agreement, BERNAS is the only company permitted to import rice 
into Malaysia. The distribution of imported rice in the country is by direct  sales to wholesalers 
which in turn distribute rice to retailers. Its exclusive right on rice importation was extended until 
10 January  2021.  
3.3.5.2   Government -linked companies (GLCs)  
3.134.   GLCs are controlled by government -linked investment companies (GLICs) such as 
Khazanah Nasional (the Government's sovereign wealth fund), Permodalan Nasional Berhad (PNB), 
or the Employees Provident Fund (EPF). GLCs and GLICs remain a significant part of the economy. 
They accounted for an estimated 5% of the national workforce and w ere the main service 
                                                
45 MDTCC online information. Viewed at: http://www.kpdnkk.gov.my/kpdnkk/barang -barang -kawalan -
yang-diberikan -subsidi -oleh-kerajaan/?lang=en  [03/08/17].  
46 WTO document, G/STR/N/16/MYS, 17 October 2016.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  providers in key strategic industries and services, including electricity, telecommunications, postal 
services, airlines, airports, public transport, banking and financial services.47 GLCs have delivered 
large-scale infrastructure proje cts as well. Furthermore, public trust funds (via EPF and PNB) were 
invested in many GLCs and are therefore reliant on their performance.  
3.135.   A 10-year GLC Transformation Programme (2005 -15) was launched in 2004/05, to turn 
GLCs into stronger and more resilie nt and competitive companies. The programme covered five 
federal -owned GLICs (EPF, Khazanah, LTAT (Armed Forces Fund Board), LTH (Lembaga Tabung 
Haji), and PNB), as well as the larger GLCs termed as G -20.48 Under the programme, GLCs 
increased their collaboration with the private sector, and divested non -core and non -competitive 
assets. The Programme also made efforts to dilute the role of the "Government" in these 
Government -linked companies, and push for th e set -up of a good regulatory environment. 
Regarding procurement, the Procurement Guidelines and Best Practices aimed to minimize rent 
seeking behaviours in procurement policies; for example, one amendment eliminated the 
requirement of obtaining approval f rom the Ministry of Finance for GLC procurement contracts 
larger than RM 100 million, thus reducing bureaucracy and potential rent seeking.49 
3.136.   GLCs and GLICs "graduated" from their transformative process when the Programme was 
completed in July 2015. The Put rajaya Committee on GLC High Performance (PCG) stated that 
GLCs show a strong 10 -year track record in delivering financial performance, catalysing 
nation -building, and benefiting all stakeholders. In particular, from FY2004 to FY2014:  
a. G-20's market capital ization grew almost three times, with total shareholder return 
growing 11.1% per annum;  
b. G-20 net profit grew at a compounded annual rate of 10.2%;  
c. G-20 made RM 153.9 billion worth of domestic investment, and employed 225,050 
Malaysians in 2014; and  
d. G-20 contributed RM 108.3 billion in dividends and RM 63.5 billion in taxes.  
3.3.5.3   Privatization  
3.137.   The privatization programme stipulates that bumiputeras should hold at least 30% equity 
of a privatized entity. Foreign participation is limited to 25% of total equity, a lthough up to 49% 
may be permitted on a case -by-case basis. All privatized projects are subject to Malaysia's 
development policies and the Privatization Master Plan with regards to foreign participation.  
3.138.   The authorities stated that public -private -partners hip (PPP) has been pivotal in Malaysia's 
growth and economic development since the early 1980s. To date, Malaysia has implemented 
852 PPP projects in various sectors, and the Government has saved a total of RM  208.5 billion.  
3.139.   The UKAS (Public Private Partn ership Unit under the Prime Minister's Office) functions as 
the central agency in coordinating PPP in Malaysia. It has developed several guidelines pertaining 
to PPP and privatization. PPP arrangements are reviewed and revised regularly by the Government 
to improve their implementation.50 
                                                
47 PCG (2015), GLC Transformation Pr ogramme Graduation Report.  Viewed at: 
http://www.pcg.gov.my/media/1118/glctp -vol1-graduation -report.pdf  [21 July 2017].  
48 The G -20 list comprises 17 GLCs due to various merge rs, demergers and other corporate exercises 
over the years. A list of these 17 companies is available at the Khazanah website 
(http://www.khazanah.com.my/ khazanah/files/44/442dca19 -b472-4394-aea2-5de0154be943.pdf ). 
49 PCG (2015), GLC Transformation Programme Graduation Report.  Viewed at: 
http://www.pcg.gov.my/media/1118/glctp -vol1-graduation -report.pdf   [21 July 2017].  
50 UKAS online information. Viewed at: http://www.ukas.gov.my/en/garis -panduan  [03/10/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.3.6   Government  procurement  
3.3.6.1   Overview  
3.140.   Government procurement plays a significant role in the country's socio -economic 
development. According to the authorities' estimate, the size of Malaysia's government 
procurement (acquisition  of goods, services and works by the federal, state and local governments 
and statutory bodies, not including purchases by government -linked companies) remained stable 
during the period under review, with the annual amount reaching RM 92.8 billion in 2016 (Table 
3.19), representing 12.6% of Malaysia's GDP in 2016. Malaysia's government procurement took 
place mostly at the federal government level. In 2016, 80.5% of the annual procurement contract 
value was conducted by federal entities. In terms of categories, development expenditure was the 
main area, which accounted for 68% of the total government procurement value in 2016. These 
figures do not include procurement by g overnment -linked companies (GLCs), which, in Malaysia, 
are not governed by the same set of rules and regulations as government agencies and statutory 
bodies.  
Table 3.19 Government procurement value by public sector, 2014 -16 
(RM million)  
Types of procurement  2014  2015  2016a 
Federal government  
a) goods and services expenditure  
b) development expenditure   
34,259  
39,503   
36,373  
40,768   
29,702  
45,000  
State government development expenditure  7,826  8,094  10,354  
Local government development expenditure  1,511  1,603  1,732  
Statutory bodies' development expenditure  8,479  7,306  5,983  
Total  91,578  94,144  92,771  
a Estimate.  
Source:  The Malaysian authorities' estimates, based on the Ministry of Finance, Economic Report  2016/2017 , 
Statistical Tables 6.1, 6.3, 6.10, 6.11 and 6.12, published on 21 October 2016 (document can be 
accessed at: www.treasury.gov.my ).  
3.141.   Its government procurement regime remains a decentralized system. Due to the 
decentralized nature, no data on annual purchases by procurement method and origin are 
available from the authorities. Foreign suppliers are not allowed to participate in domestic tenders; 
international tenders are called if there are no domestically produced supplies or services 
availabl e. 
3.142.   Government procurement is considered by the authorities as an important tool to support 
Malaysia's National Development Policy and Vision 2020, i.e. bringing the country towards being a 
high-income nation by 2020. Malaysia became an observer of the WTO Committee on Government  
Procurement in 2012. The authorities are of the view that Malaysia is unlikely to join the WTO GPA 
in the near future due to domestic policy considerations.51 
3.3.6.2   The legal framework  and government procurement system  
3.143.   Malaysia maintains a decentralized government procurement system whereby procurement 
exercises are delegated to procurement entities at different levels of government. The Ministry of 
Finance has the main responsibility for government procurement at the central government le vel, 
while at the local government levels, the responsibility falls under Chief Ministers in respective 
states.  
3.144.   The Financial Procedure Act 1957 (Revised 1972) remains Malaysia's main legal instrument 
for financial matters including government procurement,  and the Treasury Instructions detail 
financial and accounting procedures. Other relevant legislation includes the Government Contract 
                                                
51 Malaysia participated in the Trans -Pacific Partnership (TPP) nego tiations and offered related 
commitments on government procurement at the central government level (the TPP government procurement 
text is modelled largely on the revised WTO Agreement on Government Procurement (GPA)).  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Act 1949 (Revised 1973), the Ministerial Functions Act 1969, the Delegation of Powers Act 1956, 
and the 1 Treasury Circul ar (1Pekeliling Perbendaharaan or 1PP).52  
3.145.   Government procurement has traditionally been used as a tool to support Malaysia's 
socio-economic and development objectives, including: (i) promoting the growth of local industries 
by encouraging the maximum utili zation of local materials and resources; (ii)  encouraging and 
supporting greater participation of the bumiputera in the national economy; (iii) enhancing the 
capabilities of local industries via technology transfers; (iv) creating opportunities for local s ervice -
oriented industries such as freight and insurance; and (v) achieving other socio -economic and 
development objectives.  
3.146.   To ensure that all procurement principles, policies, rules and procedures are strictly 
adhered to, Malaysia has established procure ment boards in all federal ministries to consider and 
decide on tenders above RM 500,000. For goods and services above RM  50 million and works 
above RM  100 million for ministries and departments, and for tenders above RM  100 million for 
statutory bodies, f inal decisions are made by the Ministry of Finance.  
3.147.   Government procurement is divided into domestic tenders and international tenders. In 
domestic tenders, preferences are provided for bumiputera suppliers. The margin of preference for 
bumiputera supplies has remained unchanged since 2014. For goods and services contracts 
between RM 100,000 and RM 15 million, bumiputera suppliers receive a margin of preference 
between 2.5% and 10% which is inversely proportional to value. For purchases exceeding 
RM 15 million, no price preferences apply. Furthermore, preferential treatment is given to 
bumiputera manufacturers for locally produced goods; the margin is up to 10% for contracts 
valued below RM 10 million, up to 5% for contracts valued at between RM 10 million an d 
RM 100 million, and up to 3% for contracts valued above RM 100  million.  
3.148.   Foreign suppliers are not allowed to participate in domestic tenders. International tenders 
will be invited for goods and services if there are no domestically produced supplies or services 
available. For specific works, if domestic contractors do not have the expertise and capability, 
tenders may be called on a joint -venture basis between domestic and foreign contractors to 
encourage the transfer of technology. When a joint venture is not possible, international tenders 
for works may be called.  
3.149.   Malaysia has been implementing an offset policy for strategic procurement since 1980s. 
The offset policy, known as the Industrial Collaboration Programme (ICP), was reviewed in 
December 2014. The revised policy consists of three categories: (i) the Economic Enhancement 
Programme (EEP), which is applied to procurement from local companies as the prime contractor 
for contracts above RM 100 million; (ii) offset applied to procurement from foreign suppliers for 
contracts above RM 50 million; and (iii) counter trade applied to procurement from foreign 
suppliers for contracts above RM 50 million.  
3.150.   The objective of ICP is to enhance the country's industrial, technological and overall 
economic capabilit y with the aim of further increasing national competitiveness and supporting the 
high-income society agenda. Specific ICP programmes are also guided by Vision 2020, the 
Five-Year Development Plans, the National Policy on Science, Technology and Innovation,  and 
other related government policies. Malaysia aims to make the ICP a mandatory requirement for 
strategic and high -value procurement. Currently, ICP programmes have been implemented in the 
aerospace, rail, automotive, energy, weaponry, maritime and ICT s ectors.  
3.151.    The Malaysia ICP Executive Committee was established at the Ministry of Finance in 2014 
as a platform to oversee, provide strategic directions and approvals, and integrate various 
programmes planned, initiated and implemented in Malaysia.53 The Ministry of Finance also 
established a Technology Depository Agency (TDA) as the ICP authority to manage and coordinate 
all ICP implementation in Malaysia. An ICP Committee must be formed at the agency level upon 
initiation of an ICP. In parallel with  the submission of tenders, the bidders are required to submit 
ICP proposals in responding to relevant requirements. The proposals will be evaluated by the ICP 
Committee and considered as one of the main criteria in selecting the winner of contract. The 
                                                
52 The 1PP can be accessed at: http:// 1pp.treasury.gov.my/ . 
53 The ICP can be accessed at: http://1pp.treasury.gov.my/ . WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  selected contractors are required to sign the procurement contract and the ICP agreement 
simultaneously.  
3.152.   An ICP may take place in the form of helping the recipients: develop their capacity; 
manufacture products related to the procured equipment; jointly dev elop and enjoy new 
technology and know -how; use local products; access the global market via the offset provider's 
network; and attract FDI.  
3.153.   The Government is also committed to venture into green procurement as one of the 
mechanisms to minimize the impact on the environment. The Green Government Procurement 
(GGP) initiative has been implemented in stages since 2014 under the Short -Term Action Plan.54 
The initiative is monitored by the GGP Steering Committee and the Working Committee and is 
co chaired by the Ministry of Energy, Green Technology and Water and the Ministry of Finance. The 
11th MP stated a target of 20% green government procurement by 2020. The implementation of 
GGP at 12 ministries and their agencies in 2016 has resulted in a cumulative value of  green 
procurement totalling RM 482 million. Furthermore, 20 product groups were approved by the GGP 
Steering Committee in 2016.  
3.154.   The GGP Long -Term Action Plan is being finalized to replace the Short -Term Action Plan. In 
2017, GGP implementation was expand ed to all government agencies with the requirement for 
each ministry to incorporate green specification into the procurement of GGP product groups.  
3.155.   Malaysia maintains a supplier registration system. Any suppliers intending to participate in 
government proc urement of goods and services must register with the Ministry of Finance. For 
construction works, they must register with the Contractors and Entrepreneurs Development 
Division (Bahagian Pembangunan Kontraktor dan Usahawan – BPKU) of the Ministry of Works and 
the Construction Industry Development Board Malaysia (CIDB). While the former is authorized to 
issue the Bumiputera status certification for qualified contractors, the latter's role is to ensure that 
suppliers and contractors are bona fide and possess the capability to provide goods or services, or 
to carry out works. The authorities believe that the system enables the government to take 
disciplinary action and impose penalties on contractors who do not perform according to contract.  
3.156.   Procurement polici es of GLCs are approved by their respective Board of Directors and 
based on best practices. However, GLCs are encouraged to procure from local sources with a view 
to supporting local and national economic development.  
3.3.6.3   Procurement methods and the use of e -procurement  
3.157.   Procurement methods  to be used in individual procurement vary, depending on the 
contract value. The three most commonly used methods are direct purchase, quotation, and open 
tendering:  
a. For procurement of supplies and services up to RM 20,000, pr ocuring entities are allowed 
to purchase directly from any known supplier consistently supplying goods and services 
at acceptable quality and reasonable prices. The registration requirement is exempted. 
For procurement of works up to RM 20,000, procuring e ntities are allowed to purchase 
directly from a contractor who is registered with the Contractor Service Centre and the 
CIDB.  
b. For procurement of supplies and services above RM 20,000 and up to RM  500,000, 
procuring entities are required to invite quotatio ns (minimum number five).  
c. For procurement of works, supplies and services above RM  500,000, open tendering 
processes are used. Open tenders must be advertised in the MyProcurement portal with 
an option to advertise in local newspapers.  
3.158.   In addition, selec tive tendering is used to address specific concerns such as security, or 
when the number of registered companies is very limited. Limited tendering, as an exception to 
                                                
54 Information on the GGP initiative can be accessed at: (i) http://www.scpmalaysia.gov.my/en/node/4 ; 
(ii) http://1pp.treasury.gov.my/ ; and (iii) https://www.myhijau.my/green -procurement/ . WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  the Government Procurement Regulations and subject to Ministry of Finance approval, may be 
applied based on strict criteria (i.e.  security, uniformity, urgency and sole -sourcing).  
3.159.   Despite the overall decentralized nature, products for common use, such as office 
equipment, furniture and computer software, are centrally purchased. Suppliers fo r Central 
Contracts or Panel Contracts are selected through open tenders or negotiated tenders with the 
participation of domestic suppliers only. The Federal Central Contract and Panel Contract lists are 
published. When a Federal Central Contract or Panel Contract has been made for a particular item, 
all procuring entities, either at the federal level or state level, are required to purchase from these 
contracts. The Central Contracts aim at promoting domestic products and developing local 
vendors.  
3.160.   Malaysi a's e-procurement system was established in 1999. According to the authorities, it 
has greatly enhanced transparency and efficiency in procurement. The MyProcurement portal 
information centre is the main platform allowing for public access to information r elated to the 
government procurement regime including rules and regulations, tender advertisements, and 
results of recent tenders of each ministry. During the period under review, the MyProcurement 
portal was upgraded to allow for the publication of the re sults of direct negotiation deals and other 
government procurement details. Quotations and tender -related documents are available to the 
public in the interest of transparency.  
3.161.   A new ePerolehan (eP) system, an online transaction and reporting platform for federal 
government users and registered suppliers, is to be implemented from 2017.55 Purchase orders or 
contract orders can be issued through this platform for all types of procurement methods, whether 
direct purchase, quotation or tendering. The e -Catalogu e in the eP system enables suppliers to 
promote their goods and services in the form of an electronic catalogue which may be accessed 
from any device with Internet access. Based on the statistics published on the e -P portal, more 
than 110,000  suppliers wer e registered with the Ministry of Finance in June 2017. In 2016, 
government agencies fulfilled more than 1.365 million procurements, with a total value of 
RM 17.883 billion, through the system.  
3.3.6.4   Integrity and bid challenges review mechanism  
3.162.   Public accountab ility, transparency, value for money, open and fair competition and fair 
dealing are the general principles pursued by Malaysia's government procurement system to 
achieve good governance. Efforts were taken by the Government to promote transparency and 
integrity in government procurement . The Governance and Integrity Committee initiated the 
establishment of the Integrity Units in all federal and state government agencies to promote 
greater transparency in government procurement. Heads of Integrity Units are  appointed certified 
officers trained by the Malaysian Anti -Corruption Academy.  
3.163.   In addition, the Ministry of Finance introduced its Guidelines for the Implementation of the 
Integrity Pact in Government Procurement in 2010. Under the Guidelines, both procur ing entities 
and bidders are required to sign an Integrity Pact. By signing this Pact, both parties undertake not 
to pay, offer, demand or accept bribes; collude with competitors to obtain the contract; or engage 
in such abuses while carrying out the contr act. The Government is entitled to terminate a contract 
at any time when corruption or illegal activities are found.  
3.164.   The Auditor General is given the authority under project agreements to conduct an 
oversight review in order to give audit opinions or repo rts to the respective executive committees 
or steering committees. This oversight review function is performed concurrently with project 
implementation. Such projects include the Mass Rapid Transit and the Pan -Borneo Highway. Any 
project worth RM 100 milli on and above will be given priority to be audited.  
3.165.   Malaysia offers bidders a number of channels for complaint. A failed bidder may complain 
to the procuring agency, which may cancel a tender if it finds any irregularities. The bidder may 
also complain to t he Public Complaints Bureau, the Malaysian Anti -Corruption Commission, or the 
Public Accounts Committee. In addition, the Compliance and Accreditation Section under the 
                                                
55 Malaysia's Bogor Goals Progress Report (as at 30 September 2016). Viewed at: 
https://www.apec.org/About -Us/About -APEC/Achievements%20and%20Benefits/2016 -Bogor -Goals  
[03/08/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Government Procurement Division of the Ministry of Finance monitors adherence to procur ement 
rules, and may also set up special task forces to investigate complaints, when necessary. Remedial 
actions are also available through civil proceedings provided by the Civil Law Act (1956) and the 
Government Proceeding Act (1956). The authorities ind icate that they are planning to establish an  
independent bid challenge review mechanism in the coming years.  
3.3.7   Intellectual  property rights  
3.3.7.1   Overview  
3.166.   The principal agency responsible for IPR policy development and administration remains 
the Intellectual Prop erty Corporation of Malaysia (MyIPO). It handles both industrial property and 
copyright protection. MyIPO examines and registers industrial property (patents, trademarks, 
industrial designs, and geographical indications), provides advisory services, provid es information 
on IP and statistical data, provides training programmes, conducts patent agent examinations, and 
organizes awareness programmes.  
3.167.   In 2014, MyIPO introduced an IP Renewal One -Stop Centre – the Renewal Lounge – to 
provide information on proce dures and fees of IP renewal. In June 2014, an initial IPR Marketplace 
Portal was launched to enable IP owners to conduct potential transactions such as IP sale 
licensing, merchandising and/or franchising of their IP rights. MyIPO also collaborates with 
Universiti Malaysia Sarawak to introduce IP courses for undergraduate students.   
3.168.   In September 2015, Malaysia launched its IP Monetization Roadmap 2015 -2020, aiming to 
cultivate a mindset of viewing IP as an asset with financial value and returns. The Roadmap  
underlines three strategies: transforming IP into financial assets; mobilizing IP assets; and 
enhancing IP Marketplace to become a trading hub for IP. The Government allocated 
RM 200 million in 2013 to an IP financing scheme under Malaysian Debt Ventures.  To date, it has 
provided financing for 12 companies.  
3.169.   Since the previous Review in 2014, there has not been any significant change to Malaysia's 
legislative framework on IPR protection. The Government is reviewing the Patent Act 1983, Trade 
Marks Act 1976 , and the Copyright Act 1987. The main IP laws remain:  
a. Copyright Act 1987, most recently amended in 2012;  
b. Patents Act 1983, most recently amended in 2006, and the Patents Regulations, most 
recently amended in 2011;  
c. Trade Marks Act 1976, most recently amended in 2002, and the Trade Marks 
Regulations, most recently amended in 2011;  
d. Geographical Indications Act 2000, most recently amended in 2002, and the 
Geographical Indications Regulations, most recently amended in 2013;  
e. Industrial Designs Act 1996, mo st recently amended in 2013;  
f. Trade Descriptions Act 2011;  
g. Protection of New Plant Varieties Act 2004; and  
h. Layout -Designs of Integrated Circuits Act 2000 .56 
3.170.   Malaysia is a member of a number of WIPO -administered treaties ( Table 3.20). The 
Government is considering acceding to the Madrid Protocol concerning the international 
registration of marks, and the Budapest Treaty regarding the international recognition of the 
deposit of microorganisms for patent procedures. The authorities sta ted that, as acceding to 
international treaties requires amendment to the relevant acts and regulations, Malaysia is in the 
                                                
56 WIPO online information. Viewed at: http://www.wipo.int/wipolex/en/profile.jsp?code=MY  
[24/07/17].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  midst of amending the Trade Marks Act 1976 and the Patents Act 1983, to include provisions 
relating to the Madrid Protocol and the B udapest Treaty respectively.  
3.171.   Malaysia ratified the Protocol Amending the TRIPS Agreement on Public Health in 
December 2015. Also in 2015, MyIPO and WIPO signed a Service Level Agreement, aiming at 
strengthening strategic cooperation to set up a Technology  and Innovation Support Centre (TISC), 
which will host a Patent Library in Malaysia. MyIPO signed a MOU to establish TISC Host 
Institutions with 12 higher learning institutions (universities or polytechnics) and one research 
institution. The programme aims  to provide easy access to innovation and technological 
information, as well as to disseminate best practices and experiences among TISC Host 
Institutions, through various workshops and training programmes.  
Table 3.20 WIPO -administered treaties  
WIPO -administered treaties  Entry into force date for 
Malaysia  
WIPO Copyright Treaty  December 2012  
WIPO Performance and Phonograms Treaty  December 2012  
Nice Agreement Concerning the Intellectual Classification of Goods and 
Services for the Purposes of the Registration of Marks  September 2007  
Vienna Agreement Establishing an International Classification of the Figurative 
Elements of Marks  September 2007  
Patent Co -operation Treaty  August 2006  
Berne Convention for the Protection of Literary and Artistic Works  October 1990  
Convention Establishing the World Intellectual Property Organization  January 1989  
Paris Convention for the Protection of Industrial Property  January 1989  
Source:  WIPO online information. Viewed at: http://www.wipo.int/wipolex/en/profile.jsp?code=MY#a6  
[24/07/17].  
3.172.   Malaysia also signed some IP -relevant bilateral treaties:  
a. Comprehensive Economi c Cooperation Agreement between India and Malaysia, entered 
into force in 2011;  
b. Agreement on Comprehensive Economic Partnership among Japan and Member States of 
the Association of Southeast Asian Nations, entered into force in 2009;  
c. Agreement between Japan  and Malaysia for an Economic Partnership, entered into force 
in 2006;  
d. Agreement between Malaysia and Chile on the Promotion and Protection of Investment, 
entered into force in 1995;57 and 
e. As well as other agreements such as the Malaysia -Pakistan Closer Eco nomic Partnership 
Agreement; the Malaysia –New Zealand FTA; the ASEAN –Australia –New Zealand FTA; the 
Malaysia –Chile FTA; the Malaysia –Australia FTA; and the Malaysia –Turkey FTA.  
3.173.   Malaysia has been providing incentives for domestic companies to acquire indus trial 
property rights: when computing income tax, resident companies may deduct the costs of 
acquiring IP rights from foreigners (patents, designs, models, plans, trademarks, or brands, and 
other similar rights).  
3.174.   Compulsory licensing provisions are applie d to patents, layout designs of integrated 
circuits, and copyrights and related rights. There have been no changes to provisions on 
compulsory licensing, and no compulsory licences have been granted since 2014.  
3.175.   Under the Patents Act 1983, parallel imports are allowed. There are no provisions 
restricting parallel imports that relate to copyrights. With regards to trademarks, in general, the 
Trade Marks Act and its Regulations do not prohibit parallel importation. However, in practice, it 
seems that only the registered proprietor of a mark in Malaysia has the right to import goods 
                                                
57 WIPO online information. Viewed at: http://www.wipo.int/wipolex/en/profile.jsp?code=MY#a6  
[24/07/17] . WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  carrying that registered mark, unless it can be proven that the parallel good bearing the same 
mark has a connection or association with the registered proprietor in Malaysia.  
3.176.   For in dustrial property rights, the duration of protection remains the same as at the time 
of the previous Review:  
a. 20 years from the date of filing for patents, and 10 years (renewable for two further 
five-year consecutive terms) from the date of filing for util ity models;  
b. 10 years upon registration for trademarks, renewable indefinitely for ten -year periods;  
c. 10 years of protection from the date of filing for registered geographical indications 
(GIs), renewable indefinitely for  ten-year periods;58  
d. 20 years or 25 years (for trees and vines/perennial plants) from the filing date of the 
application for a plant variety that is new, distinct, uniform, and stable;  
e. 15 years from the date of application for a plant variety that is bred or discovered and 
developed by a loc al community or indigenous people, if it is new, distinct, and 
identifiable;  
f. 25 years for industrial designs;  
g. 10 years for a layout -design of an integrated circuit, from the date the layout -design is 
first commercially exploited in Malaysia or elsewhere;  and 
h. 15 years after the date the layout -design is created, notwithstanding the commercial  
exploitation.  
3.177.    Under the Trade Marks Act, a proprietor of a well -known trademark may take action in 
court to prevent third parties using their well -known marks in Malaysia without their consent. The 
Registrar may also prevent the registration of a mark that is identical  or nearly resembles the well -
known mark.  
3.178.   The legislation on trade secrets remains the same as described in the previous Review: 
there is no formal registration process for trade secrets or confidential information.59 The Ministry 
of Health stipulated that data for pharmaceuticals containing new chemical entities are protected 
for five years, and second indications are protected for three years. For a new drug product 
containing a new chemical entity, the period of test data protection is calculated from the  date the 
product is first registered or granted marketing authorization and data exclusivity/test data 
protection in the country of origin, or in any country recognized and deemed appropriate by the 
Director of Pharmaceutical Services. For a second indica tion of a registered drug product, the 
period of test data protection is calculated from the date the second indication is first approved 
and granted data exclusivity/test data protection in the country of origin, or in any country 
recognized and deemed ap propriate by the Director of Pharmaceutical Services.  
3.179.   In 2017, the pendency period was 26 months for patents and 8 months for trademarks. 
Following the introduction of expedited examination in 2011, it takes 20 months (from the date of 
filing a request) fo r a patent to be granted under the expedited procedures, and 6 months 3 weeks 
for a trademark to be granted under the expedited procedures. Non -residents made many more 
applications for patents, trademarks, and industrial designs, while residents in genera l made more 
applications for utility models ( Table 3.21). 
                                                
58 GIs are protected regardless of whether or not they are registered.  
59 For details of trade secrets protection, please see WTO document, WT/TPR/S/292/Rev.2, 
8 April 2014.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 3.21 IPR data  
 Residentsa Non-residentsa Abroada 
Patent  applications  
2013 1,199  6,006  1,100  
2014 1,353  6,267  1,308  
2015 1,272  6,455  1,027  
2016 1,279  6,176 .. 
Patent grants  
2013 288 2,372  432 
2014 344 2,361  512 
2015 344 2,533  565 
2016 373 2,980 .. 
Utility model applications  
2013 70 75 22 
2014 86 54 35 
2015 103 77 33 
2016 .. .. .. 
Trademark applications  
2013 14,705  17,520  5,513  
2014 15,400  19,171  5,074  
2015 15,940  19,983  4,297  
2016 18,527  20,580  .. 
Trademark registrations  
2013 9,777  17,202  3,516  
2014 10,467  16,961  4,682  
2015 10,529  18,271  3,241  
2016 12,686  20,120  .. 
Industrial design applications  
2013 679 1,374  356 
2014 827 1,055  308 
2015 627 1,135  249 
2016 701 929 .. 
Industrial design registrations  
2013 698 1,303  398 
2014 532 1,359  377 
2015 418 883 225 
2016 641 1,259 .. 
.. Not available.  
a A resident filing refers to an application filed in Malaysia by a Malaysian resident; a non -resident 
filing refers to an application filed by a foreign applicant; an abroad filing refers to an application 
filed by a Malaysian resident at a for eign office.  
Source:  WIPO Statistical Country Profiles – Malaysia. Viewed at: 
http://www.wipo.int/ipstats/en/statistics/country_profile/profile.jsp?code=MY  [24/07 /17]. 
3.180.   Registration is not required for a copyright to be protected. Copyright owners may 
voluntarily notify and deposit a copy of the work eligible for copyright with MyIPO. The period of 
protection for literary, musical or artistic works is the life of th e author plus 50 years.  
3.3.7.2   Enforcement  
3.181.   Fines and penalties on IPR infringing cases remain unchanged since 2014.60 IPR 
enforcement in Malaysia is mainly the responsibility of the MDTCC (Ministry of Domestic Trade, 
Cooperatives and Consumerism). Goods detained at the border by Customs are handed over to the 
MDTCC for further action. At the border, Customs officers have an ex officio duty to detain or 
suspend the release of goods that are deemed to be infringing IPRs on copyrights and trademarks. 
The Customs Inte lligence Centre collects data on seizures by the Enforcement Division of Customs. 
Main categories of goods confiscated at the border are: clothes, leather goods, liquor and beer, 
and mobile phones and accessories.  
3.182.   IPR-related cases are handled by the Inte llectual Property Court, and the Copyright 
Tribunal. Since the previous review in 2014, no cases have been brought to the Copyright 
Tribunal.  
                                                
60 For details of fines and penalties, please refer to WTO document, WT/TPR/S/292/Rev.2, 8 April 2014.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  3.183.   The MDTCC has been making efforts to combat the distribution of counterfeit goods, by: 
establishing working relat ionships with overseas enforcement agencies including Interpol; 
establishing and strengthening cooperation between MDTCC and trademark owners; strengthening 
and mobilizing the Special Taskforce Combating Counterfeit Goods, which involves various 
government  agencies and trademark owners; increasing the monitoring of business -related 
websites and social media; strengthening cooperation with Customs to increase enforcement 
action at the border.  
3.184.   MyIPO has also been making efforts to improve IPR enforcement. For  example, in 2015, 
the 2nd Global IP Valuation Conference was held in Malaysia as a platform to enhance 
understanding on IP valuation among stakeholders; in March 2016, the Government introduced an 
IP Filing Fund under the 11th MP, which aims at encouragin g and assisting youth, students and 
local communities to file IPs. MyIPO also provides various training programmes such as the IP 
summer camp, IP Funtastic Programme, and other IP awareness programmes.  
 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4  TRADE POLICIES BY SE CTOR  
4.1  Agricult ure, Forestry, and Fisheries  
4.1.1   Agriculture  
4.1.1.1   Features  
4.1.  In 2016, agriculture (including rubber), forestry, and fishing contributed 8.1% to GDP, a 
decline from 10.2% in 2011. The value of agricultural, forestry and fishing production fluctuated 
over the 2010 to 2016 period, between RM 83 billion in 2010 and RM 106 billion in 2016.1 The 
importance of agriculture varies considerably from one state to another, being over 20% of GDP in 
Kelantan, Pahang, Perlis, and Sabah, less than 2% in Selangor and the Federal Terr itory of 
Labuan, and negligible in Kuala Lumpur and Putrajaya.2 
4.2.  In 2015, agriculture accounted for 11.4% of employment with 1.61 million people employed 
in the sector down from 1.75 million in 2011. Of the 1.61 million people employed in agriculture, 
646,4 00 are non -citizens most of whom work in the palm and rubber plantations.3 
4.3.  About 43% of the total contribution to GDP from agriculture, rubber, forestry, and fishing is 
from palm oil, about 14% from fruits and vegetables, 13% from livestock, and 12% from f ishing 
(Chart 4.1). 
Chart 4.1 Contribution to GDP from agriculture, rubber, forestry, and fishing , 2010 -16 
(RM million)  
 
Note:  2015 figures are estimaste; 2016 figures are provisional.   
Source:  Department of Statistics Malaysia.  
4.4.  Malaysia is a major producer of several products. According to the FAO, in 2013, Malaysia 
was the second biggest producer of palm oil, palm frui t and palm kernels, the sixth biggest for 
natural rubber, the seventh for pepper ( piper spp ), and the tenth for coconuts.4 
4.5.  The structure of agricultur al production in Malaysia can be divided into two categories: 
estates and individual small holdings. The e states are owned by corporations or public land 
development agencies with holdings of not less than 100 acres (40.47 ha) and are involved in the 
production of industrial crops such as palm oil, rubber, or cocoa. The estates account for most of 
the palm oil  and a significant proportion of rubber and cocoa. The average farm size for small 
                                                
1 Department of Statistics, Malaysia (2017), National Accounts - Gross Domestic Product 2016 , 19 May. 
Viewed at: https://www.dosm.gov.my/v1/  [October 2017].  
2 Department of Stati stics, Malaysia (2016), Selected Agricultural Indicators 2016 , December. Viewed 
at: https://www.dosm.gov.my/v1/  [October 2017 ]. 
3 Department of Statistics, Malaysia (2016), Selected Agricultural Indicators 2016 , December. Viewed 
at: https://www.dosm.gov.my/v1/  [October 2017 ]. 
4 FAOStat online database. Viewed at: http://www.fao.org/faostat/en/#home  [October 2017] . 
020,00040,00060,00080,000100,000120,000
2010 2011 2012 2013 2014 2015 2016Forestry and logging
Fishing
Other livestock
Poultry
Other crops
Paddy
Fruit and vegetables
Rubber
Oil palmChart 4.1  Contribution to GDP from agriculture, rubber, forestry, and fishing
(RM million)
Source:  Department of Statistics Malaysia.Note:    2015 figures are estimates; 2016 figures are provisional.WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  holders is about 1.5 ha . Small holders account for nearly all food production , while many are also 
involved in industrial crops.5  
4.1.1.2   Agriculture trade  
4.6.  In 2016, Malaysia had a surplus in trade in agricultural products6 with exports of 
US$22.4  billion and imports of US$14.5  billion. In addition, exports of rubber and articles thereof7 
were US$5.8  billion and imports were US$2.9 billion. The principal agricultural exports are palm  oil 
(40% of agricultural exports in 2016), animal and vegetables fats and oils (8%), and coconut oil 
(4%). Imports are more diversified: in 2016 , sugar, the biggest import, accounted for 6% of 
agricultural imports followed by maize, food preparations n.e. s., and cocoa beans (5% each) 
(Table 4.1). 
Table 4.1 Exports and imports of agricultural products and rubber, 2013 -16 
(US$ million)  
Exports  2013  2014  2015  2016  Top 4 partners  
TOTAL  228,316  234,135  200,211  189,414  Singapore, China, 
United States , Japan  
Total agricultur al exports  25,450  26,234  22,017  22,383   
of 
which        
1511 Palm oil and its fractions, not 
chemically  modified  12,289  11,995  9,501  9,064  India, China, 
Netherlands, Pakistan  
1516 Animal or vegetable fats and oils 
and their fractions, not further 
prepared  1,942  1,946  1,553  1,735  China, United States , 
Turkey, Netherlands  
1513 Coconut (copra), palm kernel or 
babassu oil, not chemically modified  843  1,048  844  987  Netherlands, China, 
United States , Turkey  
1905 Communion wafers, empty cachets 
of a kind suitable for pharmaceutical 
use, sealing wafers, rice paper and 
similar products  470  539  579  657  Singapore, China, 
Thailand, Indonesia  
2106 Miscellaneous edible preparations // 
Food preparations n.e.s.  584  703  636  651  Australia, Indonesia, 
China, Singapore  
1804 Cocoa butter, fat and oil  379  625  557  500  Japan, United States , 
Germany, Canada  
1901 Food preparations … containing less 
than 5 % by weight of cocoa, n.e.s.  662  694  521  491  Philippines, Brunei 
Darussalam, Indonesia, 
Singapore  
2101 Roasted chicory and other roasted 
coffee substitutes, and extracts, 
essences and concentrates thereof  427  427  432  439  China, Thailand, 
Singapore, Indonesia  
2202 Waters, containing added sugar or 
other sweetening matter or 
flavoured, and other non -alcoholic 
beverages, not including fruit or 
vegetable juices of heading 20.09  335  348  313  327  Singapore, Indonesia, 
Papua New Guinea, 
China  
1517 Margarine; edible mixtures fractions 
of different fats or oils of this 
Chapter, other than of heading 
15.16  307  363  293  318  Australia, Thailand, 
Iraq, Singapore  
Rubber exports  
40 Rubber  8,285  6,942  6,237  5,761  United States , China, 
Germany, Japan  
4015 Rubber articles of apparel  3,391  3,312  3,384  3,209  United States , 
Germany, Japan, Brazil  
4001 Natural rubber in primary forms  2,228  1,398  1,034  871 China, Germany, Iran, 
United States  
4002 Synthetic rubber in primary form  196 204 351 660 China, Thailand, 
Indonesia, Sri Lanka  
 
                                                
5 Ministry of Agriculture and Agro -Based Industry (2009), Overview of the Agriculture Sector in 
Malaysia , presentation.  
6 For the purposes of this section of the report, agricultural products are those set out in Annex I of the 
Agreement on Agriculture w here fish and fish products are under HS 2012 headings 02840, 03, 050800, 
050900, 051191, 121229, 1504, 1603, 1604, 1605, and 230120. Trade in fisheries products is addressed in 
Section 4.2.2.  
7 HS heading 40.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Imports  2013  2014  2015  2016  Top 4 partners  
TOTAL  205,814  208,823  176,175  168,375  China, Singapore, 
Japan, United States  
Total agricultural imports  15,706  16,352  15,264  14,466   
of 
which        
1701 Sugar and chemically pure 
sucrose, in solid form  936  995  711  814  Brazil, Australia, 
Thailand, Guatemala  
1005 Maize (corn)  995  961  772  711  Argentina, Brazil, 
United States , Pakistan  
2106 Food preparations n.e.s.  673  666  625  661  Singapore, United 
States , Indonesia, 
China  
1801 Cocoa beans  765  917  692  654  Ghana, Cõte d'Ivoire, 
Papua New Guinea, 
Indonesia  
1513 Coconut (copra), palm kernel or 
babassu oil, not chemically 
modified  321  491  548  478  Indonesia, Thailand, 
Philippines, Papua New 
Guinea  
0202 Meat of bovine animals, frozen  471  493  535  475  India, Australia, New 
Zealand, Brazil  
2304 Oil-cake and other solid residues, 
resulting from the extraction of 
soyabean oil  748  787  577  458  Argentina, China, 
United States , India  
1901 Food preparations containing less 
than 5 % by weight of cocoa, 
n.e.s.  484  525  489  430  Singapore, Thailand, 
Philippines, Netherlands  
0703 Onions, shallots, garlic, leeks and 
other alliaceous vegetables, fresh 
or chilled  304  230  340  406  China, India, 
Netherlands, Pakistan  
2208 Undenatured ethyl alcohol of an 
alcoholic strength by volume of 
less than 80 % vol.  487  428  409  400  France, U nited 
Kingdom , Singapore, 
China  
Rubber imports       
40 Rubber  4,745  3,586  3,096  2,881  Thailand, Rep . of 
Korea, Japan, 
Viet Nam  
4001 Natural rubber in primary forms  2,482  1,873  1,307  1,164  Thailand, Côte d'Ivoire, 
Viet Nam, Philippines  
4002 Synthetic rubber in primary form  767 755 768 766 Rep. of Korea, Other 
Asia (n .e.s.), Japan, 
United States  
4011 New pneumatic tyres of rubber  490 488 484 467 Thailand, Indonesia, 
China, Viet Nam  
Source:  UNSD Comtrade.  
4.1.1.3   Domestic policies  
4.7.  Responsibility for agricultural policy is divided between a number of ministries and 
government agencies including:  
 The Ministry of Agriculture and Agro -based Industry (MOA) is the principal ministry 
responsible for the development of the agro -food and agro -business sectors. Under, or 
within, the Ministry there are eight agencies and four departments. In addition, there are 
several statutory bodies mandated to provide specific services relating  to research and 
development, and improving efficiency;  
 The Ministry of Plantation Industries and Commodities is responsible for p olicies relating to 
palm oil, rubber, cocoa, pepper, kenaf, tobacco, and timber and timber products. Under the 
Ministry are a number of agencies responsible for implementing policy and providing 
services to each product, such as the Malaysian Palm Oil Boar d (MPOB), the Malaysian Palm 
Oil Certification Council (MPOCC), and the Malaysian Palm Oil Council (MPOC);  
 The Ministry of Natural Resources and Environment; and  
 The Ministry of Regional and Rural Development.  
4.8.  The government -owned Agro Bank, which was corp oratized in 2008 under the Bank Pertanian 
Malaysia Berhad Act No . 158 of 2008, continues to provide financial services to agriculture while 
expanding its operations beyond farming to cover upstream and downstream activities including 
processing, storage, m arketing, and services ( Table 4.2). The bank's strategic plan aims to reduce WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  its dependence on government funds and the target ratio for government funds to depositors' 
funds was 24:76 by 2016 compared to 26:74 in 2014.8 In addition to general banking services, the 
bank also provides low -profit rate financing to customers under a number of government schemes 
(Section 4.1.1.4   ). 
Table 4.2 Agrobank financing for agriculture , 2013 -16 
(RM million)  
Sector  2013  2014  2015  2016  
Oil palm  1,005.54  1,135.48  1,434.60  1,704.78  
Rubber  178.34  194.9  207.14  234.38  
Other crops  1,261.41  1,413.90  1,532.84  1,945.31  
Fishery  435.52  461.41  445.20  400.35  
Forestry  34.547  55.85  20.54  12.74  
Livestock  700.81  741.78  742.79  804.82  
Other ago -based processing  123.99  255.88  347.51  543.36  
Support sector  2,653.17  2,343.32  2,753.14  3,085.20  
Total  6,393.33  6,602.52  7,483.76  8,730.94  
Source:  Malaysian authorities . 
4.9.  Agricultural policy is set out in several documents, including the Economic Transformation 
Programme, the National Agrofood Policy 2011 -2020 (NAP), the National Commodity Policy 2011 -
2020 (NCP), and the 11th Malaysia Plan (11MP) for 2016 -2020.  
4.10.   Under the Economic Transformation Programme, the Agriculture National Key Economic 
Area (NKEA) focusses on selected sub -sector s with high -growth potential (aquaculture, seaweed 
farming, edible birds' nests, herbal products, fruits and vegetables, and premium processed foods) 
along with the paddy rice and livestock sub -sectors. In addition, palm oil and rubber are addressed 
separa tely. The Programme sets out 14 Entry Point Programmes for agriculture which focus on 
transforming a traditionally small -scale production -based sector into a large -scale agribusiness 
industry. Another 12 Entry Point Programmes have been established  for pal m oil and rubber with 
targets for job creation and value of output.  
4.11.   The NAP follows the three National Agricultural Plans that covered the period 1984 to 2010 
and covers the sectors MOA is responsible for and the associated processing industry. The 
object ives of the NAP are (i) to ensure food safety and food security, (ii) to develop the agrofood 
industry into a competitive and sustainable industry, and (iii) to increase incomes of producers and 
entrepreneurs. Among the strategic directions to achieve thes e object ives are self -sufficiency 
targets for crops, livestock, and fish where self -sufficiency is defined as domestic production as a 
percentage of production + exports – imports +/ - changes in stocks ( Table 4.3). 
Table 4.3 Self-sufficiency forecasts in NAP 201 0-2020 and actual levels  
(%) 
 2010  2015  2020  
 Projection  Actual  Projection  Actual  Projection  
Crops       
Rice 71.4 63.1 71.5 72.3 69.8 
Fruits  65.8 83.7 70.7 80.8 76.3 
Vegetables  41.2 49.6 54.0 56.7 67.6 
Livestock       
Beef 29.6 30.1 30.5 23.5 32.7 
Mutton  10.6 12.1 16.0 11.46  30.9 
Poultry  127.9  105.6  129.3  104.5  131.6  
Pork 101.7  95.3 95.6 94.6 93.0 
Eggs 115.4  114.6  117.8  113.6  119.1  
Milk 4.9 8.5 5.5 7.0 6.3 
Fish for food  101.7  94.6 102.1  91.0 110.4  
Source:  National Agro food Policy 2011 -2020 (Table 2 -14), MP11, Malaysian authorities.  
                                                
8 Cambridge IF Analytica (2016), Agrobank – Charting a New Path to Sustainable Growth . Viewed at: 
http://www.google.ch/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0ahUKEwjM4Kn3_9PUAhVPbVAKH
XrKB-AQFggiMAA&url=http%3A%2F%2Fwww.cambridge -ifa.net%2Fcases%2Fagrobank -
study.pdf&usg=AFQjCNFNKPdgjE6XNgTdIwhZspYLtuJLow  [October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.12.   The National Commodity Policy 2011 -2020 covers the products under the responsibility of 
the Ministry of Plantation Industries and Commodities and provides a strategic direction for the 
development of these sub -sectors. Like the NAP, the NCP sets out a number of strategic directions 
which include: strengthe ning and moderni zing the commodities industries; moderni zation of 
production and processing; diversification to higher value -added products; generation of new 
sources of revenue; enhancing competitiveness and market expansion; accelerating the 
development of smallholders and entrepreneurs; and improving human capital.  
4.13.   The moderni zation of agriculture is part of the sixth Strategic Thrust under 11MP 
(Re-engineering economic growth for greater prosperity). The strategies set out in the Plan include 
improving productivity and incomes for farmers, fishers, and small holders; promoting training and 
encouraging young agricultural entrepreneurs; improving institutional support and extension 
services; building capacity of cooperatives and farmers' associations; impr oving market access and 
logistics support; improving access to finance; and improving performance -based incentives and 
certification programmes. Under the strategy of intensifying performance -based incentives, the 
Plan states that existing input -based subs idies will be gradually replaced by performance -based 
incentives to encourage compliance of farmers and smallholders with the Malaysian Good 
Agricultural Practices (MyGAP) certification and other certifications such as the Malaysian 
Sustainable Palm Oil (M SPO) and the Malaysian Timber Certification Scheme.9  
4.1.1.3.1   Selected sub -sectors  
Palm oil  
4.14.   Oil palm is the biggest agricultural product in Malaysia in terms of value of production, 
almost equal to the total value of all other agriculture, forestry, and fishing products put together 
and contributing about 3.5% to GDP in 2016 (compared to 8.1% for agriculture, rubber, forestry, 
and fishing in total). The area under cultivation and the total production of fresh fruit bunches 
increased steadily up to 2015 but fell i n 2016. Of the 5.7 million ha under cultivation , 84% was in 
estates and the remainder in small holdings ( Table 4.4). Palm oil is processed into a wide range of 
food a nd feed, and non -food products from crude palm oil, to stearin and olein, to bio -fuels (both 
as biomass and biodiesel), and R BDPO used in cleaning products.  
4.15.   A number of companies (25) account for a large part (24%) of the area under cultivation 
and most of  the processing sector. These companies are vertically integrated enterprises with 
international operations and some are part of larger diversified companies. They include Sime 
Darby Plantation (part of the Sime Darby Group), Felda Global Ventures Holdings  (which was 
initially the commercial arm of the Federal Land Development Authority), IOI Corporation Berhad 
(part of the IOI Group), Glenealy Plantations Sdn Berhad (part of the Samling Group), Genting 
Plantations Berhad, and Kuala Lumpur Kepong Berhad.  
Table 4.4 Oil palm , selected indicators , 2010 -16 
 2010  2011  2012  2013  2014  2015  2016  
Value of crude palm 
oil production (RM 
million)  45,900  60,876  51,922  45,562  46,876  42,987  45,948  
Quantity produced 
(000 tonnes fresh 
fruit bunches)  83,918  93,815  93,265  95,729  96,067  98,344  86,325  
Area under cultivation 
(000 ha)  4,854  5,000  5,077  5,230  5,392  5,643  5,738  
of which         
Estates (000 ha)  4,203  4,302  4,385  4,482  4,585  4,760  4,804  
Small holdings (000 
ha) 651 698 692 748 807 883 934 
Employment  .. .. .. 442,094  451,507  437,495  429,351  
.. Not available.  
Source:  Department of Statistics Malaysia and Malaysia authorities.  
                                                
9 Prime Minister's Department (2015), Eleventh Malaysia Plan 2016 -2020 – Anchoring Growth on 
People, p p. 8-24 to 8 -26. WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.16.   In addition to, or as part of the Ministry of Plantation Industries and Commodities, there are 
a number of public agencies responsible for policy development and implementation for palm oil 
including the Malaysian Palm Oil Board (MPOB), the Malaysian Palm Oil Council (MPOC) , and the 
Malaysian Palm Oil Certification Council (MPOCC).  
4.17.   MPOB was established in 2000 under the Malaysian Palm Oil Board Act No. 582 of 1998 and 
is the principal government agency responsible for developing and promoting national objectives 
and policies for the oil palm industry, including research and developme nt, training, and 
regulation.10  
4.18.   The Malaysian Palm Oil Council (MPOC), incorporated in 1990, is responsible for promoting 
palm oil and its derivatives, including trade opportunities.   
4.19.   The Malaysian Palm Oil Certification Council (MPOCC) began operations in  2014 as an 
independent non -profit organization established to develop the Malaysian Sustainable Palm Oil 
(MSPO) Certification Scheme. The MPOCC is responsible for setting standards, developing 
certification systems, and other processes relating to sustain able production and processing of 
palm oil. Two types of certificates are issued by accredited certification bodies that conduct third -
party verification audits: oil palm management certification for responsible management of palm 
oil plantations, small  holdings and palm oil processing facilities; and supply chain certification for 
entities that process, trade or manufacture palm oil from certified oil management units. At 
July 2017, total certified planted area was 245,079 ha.11  
4.20.   In addition to general taxe s such as corporation tax and the goods and services tax, 
plantations may be liable for a windfall profit levy, collected by the Malaysian Royal Customs 
Department, which replaced a cess on production. The windfall profit levy rate is charged 
whenever the average monthly crude palm oil price is greater than RM 2,500 in Peninsular 
Malaysia or RM  3,000 in Sabah and Sarawak:  
 In Peninsular Malaysia,  the tax is 3% of the average monthly crude palm oil price in excess 
of RM  2,500 multiplied by the monthly product ion of fresh fruit bunches in tonnes . 
 In Sabah and Sarawak , the tax is 1.5% of the average monthly crude palm oil price in 
excess of RM  3,000 multiplied by the monthly production of fresh fruit bunches in tonnes.  
4.21.   In addition, an export duty is applied whic h is set each month based on the average market 
price for crude palm oil ( Table 4.5). For September 2017, the crude palm oil price for the purposes 
of setting the export duty rate was RM 2,677.91 per tonne; therefore , the export duty was 5.5% 
for that month.  
Table 4.5 Export duty rate (after partial duty exemption)  
Crude palm oil market price  
RM per tonne  Export duty  
% 
Less than 2,250  0 
2,250 - 2,400  4.5 
2,401 - 2,550  5.0 
2,551 - 2,700  5.5 
2,701 - 2,850  6.0 
2,851 - 3,000  6.5 
3,001 – 3,150  7.0 
3,151 - 3,300  7.5 
3,301 - 3,450  8.0 
Greater than 3,450  8.5 
Source:  MPOB online information. Viewed at: http://bepi.mpob.gov.my/index.php/en/statistics/export -
duties.html  [October 2017].  
4.22.   There are about 644,522 oil palm small holders (less than 40.47 ha) in Malaysia who may 
qualify for a number of incentive schemes including the Replanting Subsidy for Oil Palm 
                                                
10 Malaysian Palm Oil Board online information. Viewed at: http://www.mpob.gov.my/  [October 2017].  
11 Malaysian Palm Oil Certification Council online information. Viewed at: https://www.mpocc.org.my/  
[October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  smallholders (TSSPK), Oil Palm Smallholders New Planting Scheme (TBSPK), Smallholding 
Maintenance Assistance (CPC) and Cantas Discount Scheme (SKIDIC). Under the replan ting and 
new planting schemes, small holders can receive about RM 7,500 per ha in peninsular Malaysia or 
RM 9,000 in Sabah and Sarawak. From 2011 -2016 (the period under the 10th Malaysia Plan): 
56,910 small holders with a total of 132,829 ha received plant ing assistance; 918 small holders 
with less than 2.5 ha received about RM  500 per month under the CPC; and 2,772 small holders 
received a discount of RM  1,000 for harvesting machines (called cantas). The 2017 budget 
allocation for replanting of oil palm wa s RM 40 million.12 
4.23.   The National Biofuel Policy of 2006 aims to promote sustainable energy sources, to reduce 
dependency on fossil fuels, and to improve palm oil prices. Biofuels, using crude palm oil as the 
feedstock, are to be used for transport, industry,  and for export. Under the Biofuel Industry Act of 
2007, MPIC introduced a requirement to blend diesel with 5% biodiesel (B5) starting in 2011 in 
some regions and extended to the whole country by end -2014. In 2015, the B7 blend was 
implemented throughout M alaysia and B10 is to be implemented in 2017. About 360,000 tonnes of 
crude palm oil were used to produce 525 million litres of biodiesel for blending with petroleum 
diesel in 2015.13 There are no specific direct incentives to consumers or the industry unde r the 
programme.  
Rubber  
4.24.   Although the value of production, quantity produced, and area under rubber cultivation are 
lower than in the mid -2000s, partly due to a shift to oil palm cultivation, rubber still represents 
over 7% of the GDP of agriculture, forest ry and fishing , and the manufacturing of rubber products 
in Malaysia is an important source of employment. Small holdings represent over 90% of the area 
under rubber trees ( Table 4.6). 
Table 4.6 Rubber , selected indicators , 2010 -16 
 2010  2011  2012  2013  2014  2015  2016  
Cultivation  
Quantity produced (000 tonnes)  939 996  923  826  669  722  674 
Area under cultivation (000 ha) 1,020  1,027  1,041  1,057  1,066  1,079  1,072  
of which         
Estates (000 ha)  64 64 66 77 80 77 77 
Small holdings (000 ha)  956 963 975 980 986 998 996 
Employment  10,805  10,885  12,456  12,046  12,360  11,636  10,264  
Manufactured locally produced rubber products  
Sales value (RM million)  12,965  14,614  16,145  16,449  15,779  16,948  17,123  
 of which         
 Tyres, inner tubes (RM million)  1,893  1,883  1,948  1,823  1,845  1,924  1,891  
 Retreaded tyres (RM million)  160 261 258 222 217 198 205 
 Rubber gloves (RM  million)  7,785  8,483  9,831  10,001  9,693  10,369  10,493  
 Other rubber goods (RM million)  3,727  3,986  4,108  4,414  4,114  4,457  4,534  
Employment  61,278  60,694  66,880  70,049  70,216  71,206  75,366  
Source:  Department of Statistics Malaysia, Malaysian Rubber Board Statistics 2016.  
4.25.   Over the same period of mid -2000s to 2015, imports of natural rubber increased and then 
stabilized at about 0.9 to 1 million tonnes reflecting the continuing growth of the processi ng 
industry and the use of imported raw materials ( Table 4.1). In 2015, there were about 300 
companies in Malaysia making a wide variety of rubber products , although over 80% of rubber 
consumption went into making latex products, mostly rubber gloves. The total sales value of 
locally manufactured rubber goods was about RM  17 billion, of which RM 10.4 billion was rubber 
gloves and RM 2 billion tyres and inner tubes.14  
4.26.   The Ministry of Plantation Industries and Commodities is responsible for policy development 
for the rubber industry, and the Malaysian Rubber Board, established in 1998, is responsible for 
assisting in policy development and implementing policy from  the cultivation of trees, to the 
                                                
12 EY (2016), Budget 2017 – Malaysia , Volume 4 – Issue 3 – 24 October . 
13 USDA (2016), Malaysia – Biofuels Annual – 2016, GAIN Report Number MY6004, 27 July. Viewed at: 
https://gain.fas.usda.gov/Pages/Default.aspx  [October 2017].  
14 Malaysian Rubber Board (2016), Natural Rubber Statistics 2016 . Viewed at: 
http://www.lgm.gov.my/nrstat/nrstats.pdf  [October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  extraction and processing of its raw rubber, to the manufacture of rubber products and the 
marketing of rubber and rubber products. A number of institutions operate under the MRB 
including the Rubber Research Institute of Malaysi a, the Malaysian Rubber Research and 
Development Board, the Malaysian Rubber Exchange and Licensing Board, and the Malaysian 
Rubber Export Promotion Council.  
4.27.   The policy objectives under the Economic Transformation Programme are set out in four 
Entry Point Projects: to increase productivity; encourage replanting; increase global market share 
for latex gloves to 65% by 2020; and ensure the commerciali zation of Ekoprena and Pureprena 
(Green Rubber) as raw materials for the production of high -end rubber product s, such as 
eco-friendly green tyres.15 
4.28.   Under the Rubber Production Incentive (RPI) scheme, registered small holders are 
compensated whenever the average monthly price falls below a threshold. The compensation 
equals the difference between the average price and the threshold, up to a maximum amount. In 
2015, RM  100 million was allocated to the scheme, RM 200 million in 2016, and RM 250 million in 
2017 ( Table 4.7).16 
Table 4.7 Rubber production incentive , 2015, 2016 and 2017  
 2015  2016  2017  
Threshold     
SMR 20 (RM per kg f.o.b.)  4.60 5.50 5.50 
Farm gate (RM per kg cup lump)  1.75 2.20 2.20 
Incentive (RM per kg cup lump)  Min Max Min Max Min Max 
 Peninsular  0.10 0.10 0.10 0.50 0.00 0.00 
 Sabah  0.20 0.40 0.20 0.90 0.05 0.20 
 Sarawak  0.10 0.30 0.10 0.60 0.20 0.30 
Total budget allocation (RM million)  100 200 250 
Source:  Malaysian Rubber Board, Rubber Journal Asia, and EY (2016), Budget 2017 – Malaysia , Volume 4 – 
Issue 3 –24 October, and Malaysian authorities.  
4.29.   In addition to the Rubber Production Incentive scheme, grants for replanting and new 
planting by small holders of  RM 9,000 to RM 14,000 per ha are available with a total budget 
allocation, in 2015, of RM 97 million for replanting and RM 110 million for new planting.17 
4.30.   A cess on exports of 0.2% of the export value is charged to the manufacturer of rubber 
products (exce pt rubber -based shoes, tyres, and inner tubes). In addition, a cess of RM 0.04 per 
kg is charged on natural rubber sold to manufacturers in Peninsular Malaysia, and on natural 
rubber (inclusive of unvulcanised compounded rubber and unvulcanised rubber in o ther forms 
(HS Headings 4005 and 4006 respectively)) exported or transferred out of Peninsular Malaysia.18 
Livestock  
4.31.   The value of livestock production has increased steadily over the past few years reaching 
RM 18,528 million in 2015, partly due to increasin g production but also to rising prices. Most 
ruminant production is based in small holder farms , sometimes mixed with rubber and palm 
planting ( Table 4.8).  
4.32.   The non-ruminant subsector (chickens and pigs) is more developed in terms of production 
capacity and scale , and is operated by larger enterprises using feedstuffs. The feedstuffs include 
locally available products , such as palm kernel cake and other palm by -products , but most are 
                                                
15 Ministry of Trade and Industry online information. Viewed at: 
http://www.miti.gov.my/index.php/pages/view/2476  [October 2017].  
16 Malaysian Rubber Board online information. Viewed at: 
http://www.lgm.gov.my/whatsnew/IPG_BI.pdf  [October  2017] ; Rubber Journal Asia  (2016), Malaysia launches 
rubber production incentive scheme this month , 25 July. Viewed at: http://rubberjournalasia.com/malaysia -
launches -rubbe r-production -incentive -scheme -this-month/  [October  2017] ; EY (2016), Budget 2017 – 
Malaysia , Volume 4 – Issue 3 – 24 October . 
17 Performance Management and Delivery Unit (PEMANDU) (Department of the Prime Minister) (2015), 
Economic Transformation Programme - Annual Report 2014, p. 109. Viewed at: 
https://www.pemandu.gov.my/download -centre/  [October  2017].  
18 Malaysian Rubber Board  (Cess) Order 2009,  PU(A) 3 17. WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  imported. From 2012 -2016, imports of animal feeds (not including unmilled cereals)19, have 
ranged from 1.7 to 2.1 million tonnes, and imports of soy beans20 (most of which are used for 
poultry feed21) from 0.6 to 0.8 million tonnes ( Table 4.1).22 
Table 4.8 Livestock indicators , 2008 -15 
 2008  2009  2010  2011  2012  2013  2014  2015  
Value of production (RM million)  
Total 9,853  10,368  11,262  11,610  13,446  14,788  16,8223  18,528  
of which          
Poultry  5,183  5,359  5,776  5,950  6,868  7,414  8,499  9,534  
Beef 697 768 847 889 1,032  1,142  1,265  1,412  
Pork 1,729  1,826  2,074  2,047  1,969  2,049  2,402  2,526  
Eggs 2,092  2,225  2,359  2,614  3,275  3,873  4,350  4,752  
Milk  30 43 49 46 54 58 68 80 
Quantity of production (000 tonnes – unless otherwise stated)  
Poultry meat  1,163  1,202  1,296  1,290  1,374  1,458  1,584  1,633  
Beef  38 42 47 49 51 52 53 51 
Mutton  2 2 2 3 5 5 5 4 
Pork 195 206 234 214 218 217 218 223 
Eggs 523 556 590 621 644 684 728 793 
Milk (million 
litres)  20 24 27 25 27 29 34 37 
Note:  Milk production data are for milk for human consumption only.  
Source:  Department of Veterinary Services. Viewed at: http://www.dvs.gov.my/index.php/pages/view/1498  
[October 2017].  
4.33.   The MOA is responsible for developing policy and legislation for the livestock industry. In 
addition , a number of government agen cies are also responsible for implementing policy in specific 
areas , such as the Department of Veterinary Services for animal health and production.  
4.34.   Under the National Agrofood Policy 2011 -2020, policy is focused on improving efficiency and 
increasing prod uction, including production of feedstuffs. This includes disease control objectives 
to achieve foot and mouth disease free status through a vaccination programme and brucellosis 
and bovine tuberculosis free status through a culling programme , as well as m easures to maintain 
disease free status for avian influenza and nipah virus and containment of Newcastle disease. 
Small -scale slaughtering is to be phased out and central slaughtering plants established to ensure 
halal requirements are adhered to , as well as for health, sanitary, and environmental protection  
reasons .23 
Rice 
4.35.   Rice production, yield per hectare, and the area under cultivation increased steadily each 
year from 2008 to 2014 , with a slight decline in 2015 ( Table 4.9), as the Government has 
continued to prioriti ze the subsector under the NAP. Rice production is carried out by small holders 
operating average plots of about 2  ha24 mostly in the "granary area s" established under earlier 
agricultural plans.  
                                                
19 SITC Rev.4 heading 081.  
20 SITC Rev.4 heading 2222.  
21 USDA (2017), Malaysia – Oilseeds and Products  Annual – 2017, GAIN Report Number MY7003, 
29 March. Viewed at: https://gain.fas.usda.gov/Pages/Default.aspx  [October 2017].  
22 UNSD Comtrade online database. Viewed at: https://comtrade.un.org/data/  [October 2017].  
23 Ministry of Agriculture and Agro -Based Industry (2011), National Agrofood Policy 2011 -2020, 
p. 58-62. 
24 Performance Management and Delivery Unit (PEMANDU) (Department of the Prime Minister ) (201 0), 
Economic Transformation Programme , p. 519.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 4.9 Rice, selected indicators , 2008 -15 
 2008  2009  2010  2011  2012  2013  2014  2015  
Cultivation    
Value of production (RM million)  1,765  1,883  1,849  1,934  1,950  1,953  2,136  2,042  
Quantity produced (000 tonnes)  2,353  2,511  2,465  2,579  2,599  2,604  2,849  2,723  
Planted area (000 ha)  657 675 678 688 685 672 679 681 
Source:  Department of Statistics Malaysia, FAOStat, and Malaysian authorities.  
4.36.   Policy formulation and preparation of legislation relating to rice are the responsibility  of the 
MOA. Under the MOA, there are several agencies responsible for the development of rice, including 
the Department of Agriculture, MARDI, and the Farmers Organi zation A uthority. In addition, there 
are a number of agencies responsible for overseeing the granary areas: Muda Agriculture 
Development Authority (MADA); Kemubu Agricultural Development Authority (KADA); Northwest 
Selangor Integrated Agricultural Development Proj ect (PBLS); Integrated Agricultural Development 
Project (IADA) Seberang Perak; IADA Penang; IADA KETARA; IADA KERIAN; IADA Kemasin 
Semerak; IADA Rompin; IADA Pekan; IADA Batang Lupar: and IADA Kota Belud.   
4.37.   Policy under the NAP is focused on increasing prod uctivity and quality of paddy rice, 
effective mechani zation, and use of by -products, as well as improving management of the national 
stockpile, restructuring incentives and subsidies for paddy and rice and strengthening 
management of paddy and rice institu tions.25 
4.38.   Under a privatization agreement in 1996, the formerly state -owned company, the National 
Paddy and Rice Ltd Company (BERNAS) agreed with the Government to a set of duties and 
obligations which include : the management of the national rice stockpile ; the purchase of paddy 
from paddy farmers at the guaranteed minimum price ; acting as buyer of last resort for paddy 
farmers ; manag ing the disbursement of the subsidies to all registered paddy farmers ; manag ing 
bumiputera  rice millers ' schemes ; and promoting consumer interests to achieve a fair and stable 
price and ensure sufficient supply of rice.26 The agreement also gives BERNAS the sole right to 
import and distribute rice for the Malaysian market. According to the authorities, the existing 
agreement will be maintained until January 2021. BERNAS has been notified to the WTO as a state 
trading enterprise under Article XVII of GATT 1994 and the Understanding on the Interpretation of 
Article XVII.27 
4.39.   The stockpile operated by BERNAS for the Governmen t was set at 292,000 tonnes in 
2008.28 According to the authorities, with effect from 1 August 2016, the Government has set the 
stockpile operated by BERNAS at 150,000 tonnes.  
4.40.   In addition to the Guaranteed Minimum Price of RM 1,200 per tonne (increased fro m 
RM 750 per tonne in 2014), a range of support measures are available for rice producers including 
direct payments for each tonne produced, a number of input subsidies, and a rice millers subsidy 
(Table 4.10).29 In 2016 , the total cost of the rice subsidy programmes was reported to be 
                                                
25 Ministry of Agriculture and Agro -Based Industry (2011), National Agrofood Policy 2011 -2020, 
p. 47-49. 
26 BERNAS (2017), Notice of Extraordinary General Meeting , 2 March, p. i. Viewed at: 
https://www.sc.com.my/wp -content/uploads/eng/html/tom_site/circularstatement_Bernas_02032017.pdf  
[October 2017].  
27 WTO document G/SR/N/16/MYS, 17 October 201 6. 
28 OECD (2017), Building Food Security and Managing Risk in Southeast  Asia, OECD Publishing, Paris. 
p.111. Viewed at: http://dx.doi.org/10.1787/9789264272392 -en [October 2017]; and Caballero -Anthony M, 
Teng  P, Lassa J, Nair T, Shrestha M, Public Stockpiling of Rice in Asia Pacific , Nanyan Technological University, 
NTS Report 2016, p. 38. Viewed at: https://www.rsis.edu.sg/wp -content/uploads/2016/04/NTS -Report -No-3-
11April2016.pdf  [October 2017].  
29 MARDI (2015), Policies and Economic Development of Rice Production in Malaysia , 17 March. Viewed 
at: http://ap.fftc.agnet.org/ap_db.php?id=393  [October 2017].  
Vengedasalam D, Harris M, MacAulay G (2011), Malaysian Rice Trade and Government Interventions , 
paper presented to the 55th Annual Conference of the Australian  Agricultural and Resource Economics Society, 
8-11 February 2011. Viewed at: http://ageconsearch.umn.edu/bitstream/100726/2/Vengedasalam.pdf  
[October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  approximately RM  1 billion per year30 and RM 1.3 billion was allocated in 2017, which was 46% of 
the total allocation to agriculture ( Table 4.11).31 
Table 4.10 Incentives for rice production 2009, 2014, and 2016  
 2009  2014  2016  
 Budget 
allocation  
RM million   Budget 
allocation  
RM million   Budget 
allocation  
RM million  
Price subsidy  RM 248.1/tonne  448 RM 248.1/tonne  480 RM 300/tonne  507 
Fertilizer subsidy   275  465  400 
NPK mixed  240 kg/ha   240 kg/ha  240 kg/ha  
Organic  80 kg/ha  80 kg/ha  80 kg/ha  
Yield increase 
incentive  RM 650/tonne 
increase  40 RM 650/tonne 
increase  80 0 0 
Paddy production 
incentive   150  150  120 
Ploughing  RM 100/ha   RM 100/ha  RM 100/ha  
Fertilizer  RM 140/ha  RM 140/ha  RM 140/ha  
Additional fertilizer  150 kg/ha  250 150 kg/ha  253 150 kg/ha  240 
Pesticides/herbicides  RM 200/ha  173 RM 200/ha  140 RM 200/ha  130 
Rice Millers Subsidy   250  528  0 
Peninsular Malaysia  RM 750/tonne  RM 750/tonne  0 
Sabah & Sarawak   RM 600/tonne  RM 600/tonne  0 
Sabah & Sarawak 
subsidy   150a 0 0 RM 950.90/ha  70b 
Note:  a: Difference between wholesale price and purchase cost of rice imports.  
 b: Hill paddy fertilizer in Sabah and Sawarak.  
Source:  Malaysian authorities, MARDI (2015) and Vengedasalam D, et al.  
4.1.1.4   Trade policy  
4.41.   On average, tariffs on agricultural tariff lines (WTO definition), with a simple average of 
3.3%, are lower than on non -agricultural tariff lines (simple average 8.0%). Furthermore, over 
two-thirds of agricultural tariff lines are duty free and the range o f tariffs (the standard deviation is 
8.2) is less than on non -agricultural tariff lines. However, these figures exclude 64 tariff lines with 
specific duties (58 of which are alcoholic beverages, 5 cigarettes and cigars, and one for 
pineapples). The ad valo rem equivalents of these tariff rates vary from 0.2% (clove cigarettes) to 
465% ( certain manufactured tobacco ) (Section 3.1.3.1).  
4.42.   Malaysia has reserved the right to use the special agricultural safeguard for 71 tariff lines 
but the SSG has never been invo ked.32 
4.43.   Malaysia has commitments relating to 19 tariff quotas for a range of meat and animal 
products as well as cabbages, unroasted coffee beans, wheat flour, sugar, and tobacco. The most 
recent notification for imports under tariff quotas was for calendar years 2014 and 2015, and the 
previous one for 1999 -2013.33 For 1999 -2007, an applied tariff regime operated where the quotas 
were not opened and the applied tariff on all imports did not exceed the in -quota tariff. From 2008 
to 2015, nine quotas were applie d (10 in 2011) one of which was a combination of three scheduled 
quotas for poultry meat and offal. In some cases, a quota was opened for more than the scheduled 
quantity. Actual imports within tariff quotas varied from one product to another and from one year 
to another , for example:  
 For live poultry chickens (HS 010594190);  
                                                
30 Caballero -Anthony  M, Teng  P, Lassa J, Nair T, Shrestha M, Public Stockpiling of Rice in Asia Pacific , 
Nanyan Technological University, NTS Report 2016, p. 40. Viewed at: https://www.rsis.edu.sg/wp -
content/uploads/2016/04/NTS -Report -No-3-11April2016.pdf  [October  2017].  
31 EY (2016), Budget 2017 – Malaysia , Volume 4 – Issue 3 –24 October . 
32 WTO documents G/AG/N/MYS/3, 16 April 1996; G/AG/N/MYS/9, 10 December 1997; 
G/AG/N/MYS/15, 14 September 2000; G/AG/N/MYS/16, 19 July 2005; G/AG/N/MYS/17, 20 January 2006; 
G/AG/N/MYS/21, 19 November 2008; G/AG/N/MYS/23, 20 March 2009; G/AG/N/MYS/27, 16 March 2010; 
G/AG/N/MYS/28, 27 March 2012; G/AG/N/MYS/31, 16 July 2014; G/AG/N/MYS/33, 24 March 2015; and 
G/AG/N/MYS/37, 5 October 2016.  
33 WTO document G/AG/N/MYS/39, 13 July 2017; G/AG/N/MYS/34, 27 March 2015; 
G/AG/N/MYS/34/Corr.1, 28 September 2015 ; and G/AG/N/MYS/39, 13 July 2017.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   the scheduled quota is 1,943,125 animals;  
 the actual quota opened varied from 1,943,128 in 2008 to 2,195,275 in 2015; and  
 in-quota imports varied from zero in 2008, 2009, and 2012 to 53,645 in 2015; and  
 For milk and cream (HS 040110110, 040120100, and 040140100);  
 the scheduled quota is 1,000,000 litres;  
 the actual quotas opened varied from 6,620,000 litres in 2008 to 8,922,473 in 2015; 
and 
 in-quota imports varied from 341,983.15 in 201 4 to 8,110,007 litres in 2009.34 
4.44.   According to the authorities, quota allocation is on a first -come -first-served basis.  
4.1.1.5   Support levels  
4.45.   The total budgetary outlay for agriculture in 2017 was about RM 2.8 billion under a variety 
of programmes ( Table 4.11). However, this includes research but does not include the value of 
border measures , such as tariffs , and does not take account of the taxes and fees paid for 
production a nd/or export of some commodities.  
Table 4.11 Budget outlay for agriculture, 2017  
(RM million)  
 2017  
Rice subsidies  1,300  
Production of palm oil, rubber, cocoa, pepper  286 
Rubber small holders – rainy season  subsidy  260 
Rubber small holders – production incentive  250 
Fishers – living allowance  250 
Food distribution  140 
Palm oil – quality, replanting, roads  100 
Young agricultural entrepreneurs  100 
Palm oil – research  50 
Palm oil small holders – replanting  30 
Palm oil small holders – upgrading roads  20 
Source:  EY (2016), Budget 2017 – Malaysia , Volume 4 – Issue 3 –24 October.  
4.46.   The last notification of agricultural support to the WTO was in 2014 for calendar years 2008 
to 2011. According to these notifications, all support measures are in the Green Box category or 
are input subsidies to resource -poor farmers as provided for under Article 6.2 of the Agreement on 
Agriculture. Most support is for the price stabilization and guaranteed minimum price sc hemes for 
paddy farmers and drainage and irrigation facilities. The fertilizer subsidy scheme notified as a 
measure that meets the criteria of Article 6.2 is only for paddy farmers. The value of support 
under different measures varies from one year to anot her, particularly in 2009 when support for 
the price stabilization and guaranteed minimum price  schemes , and drainage and irrigation , 
increased compared to earlier years before declining in 2010  (Chart 4.2). 
                                                
34 WTO documents G/AG/N/MYS/34, 27 March 2015; and G/AG/N/MYS/34/Cor r.1, 28 September 2015.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
- 91 - 
 
  Chart 4.2 Domestic support in Malaysia,  2004 -16 
 
Source:  WTO notifications.  
4.47.   A number of Government programmes are operated by Agrobank to provide finance to the 
agriculture and fishing sectors. The profit rates charged by Agr obank for the loans to farmers 
under mandated programmes is 3.75%, which tends to be significantly lower than the profit rates 
charged by commercial banks ( Table 4.12). 
Table 4.12 Financing scheme funds operated by Agrobank , 2013 -16 
(RM million)  
Fund  Note  2013  2014  2015  2016  
Fund for Food  
(3F) To enhance food  production and reduce dependency 
on imports; Merged with DPUP  1 in May 2014  1,003.0  234.8  232.3  209.1  
Oil Palm Replanting  Replanting oil plantations  13.0 12.0 11.0 10.0 
Micro Enterprise Fund  Micro financing for selected eligible micro 
entrepreneurs  94.6 83.5 51.2 301.1  
Commercial 
Agriculture Fund  To finance the commercial agro -based industry  n.a. 162.7  170.3  178.2  
Agriculture 
Entrepreneur Fund 1  
(DPUP 1)  To enhance food production and reduce dependency 
on imports  n.a. 886.7  925.5  961.6  
Agriculture 
Entrepreneur Fund 2  
(DPUP 2)  To stimulate growth of farming activities involving 
up and downstream activities  
 n.a. 103.3  107.6  111.7  
Agriculture 
Entrepreneur Fund 3  
(DPUP 3)  To stimulate growth of farming activities involving 
up and downstream activities  
 n.a. n.a. 101.7  105.3  
Special Relief Facility  For farmers affected by flooding in December 2014  n.a. n.a. 11.8 10.6 
Bumiputera 
Commercial and 
Industrial Community 
Scheme  Financing facilities to Bumiputera entrepreneurs, 
farmers, fishers and other related institutions; 
Merged with DPUP 1 in May 2014  51.1 n.a. n.a. n.a. 
Paddy Credit Scheme  To encourage the paddy industry; Merged with DPUP 
1 in May 2014  76.7 n.a. n.a. n.a. 
Food Production 
Credit Scheme  Merged with DPUP 1 in May 2014  74.6 n.a. n.a. n.a. 
Fishery Boat Financing 
Scheme  To modernize facilities with the fishery industry, 
promote deep sea and high sea fishing industry; 
Merged with DPUP 1 in May 2014  140.0  n.a. n.a. n.a. 
Entrepreneur Scheme 
for Graduates  To encourage the involvement of graduates in the 
agriculture sector; Merged with DPUP 1 in May 2014  6.0 n.a. n.a. n.a. 
Financing for Small 
and Medium Size 
Industries  To encourage investment in the agricultural 
industry; Merged with DPUP 1 in May 2014  
 73.0 n.a. n.a. n.a. 
Non-Food Production 
Credit Scheme  To enhance primary and tertiary agricultural 
activities;  Merged with DPUP 1 in May 2014  22.6 n.a. n.a. n.a. 
Total   1,555.6  1,482.9  1,611.4  1,887.6  
n.a. Not applicable.  
Source:  Malaysian authorities, and Agrobank annual reports 2015 and 2016. Viewed at: 
http://www.agrobank.com.my/home/corporate -info/annual -reports/  [October 2017].  
02004006008001,0001,2001,400
Price stabilization and
guaranteed minimum
price
Extension services
Marketing
Research and
development
Drainage and irrigation
facilities
050100150200250300350400450Chart 4.[]  domestic support in Malaysia, 2004 -16  
Article 6.2 Investment and input support Green Box
Source:  WTO notifications.(RM million) (RM million)WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.1.2   Fisheries  
4.1.2.1   Features  
4.48.   Although fisheries contributed only about 1% to GDP in 2016 , seafood products are an 
important source of food with consumption over 50 kg per person per year. There were about 
132,305 people working on licensed fishing vessels in 2016, of which about 27% wer e non -
Malaysian ( Table 4.13).35 
Table 4.13 Selected indicators, 2010 -16 
 2010  2011  2012  2013  2014  2015  2016  
Contribution  to GDP (RM million)  
Fishing  9,036  9,687  10,893  11,367  12,312  12,181  12,654  
Marine  5,997  6,441  6,989  7,505  8,105  8,007  8,545  
Aquaculture  3,039  3,246  3,904  3,862  4,207  4,175  4,109  
Employment         
Working on licensed 
vessels  129,622  134,110  136,514  144,019  143,421  140,949  132,305  
Aquaculture  n.a. n.a 52,273  47,689  47,174  44,857  n.a. 
n.a. Not available.  
Source:  Department of Statistics Malaysia, Department of Fisheries.  
4.49.   In quantity terms, marine capture has been relatively stable over 2010 to 2015. 
Aquaculture has declined, although it remained considerably higher than in the early years of the 
21st century. Inland capture has also remained fairly stable , although it is very small compared to 
marine capture or aquaculture ( Table 4.14).36  
Table 4.14 Marine and inland capture fishing and aquaculture, 2007 -15 
 2007  2008  2009  2010  2011  2012  2013  2014  2015  
000 tonnes           
Inland capture  4.3 4.4 4.5 4.5 5.7 5.0 5.6 5.5 5.9 
Marine capture  1,386  1,398  1,397  1,433  1,377  1,476  1,487  1,462  1,490  
 of which           
 Not identified  442.9  402.6  367.8  392.3  342.4  354.9  324.4  306.5  296.6  
 Indian mackerels  
n.e.i. 156.7  170.3  185.5  186.2  183.6  187.2  190.9  181.4  190.1  
 Indian scad  90.0  96.9  92.0  82.8  76.8  102.8  107.8  102.6  117.2  
 Shrimps, prawns  71.7 81.0 90.3 116.0  109.2  120.3  108.0  107.6  114.9  
 Tunas, bonitos, 
billfishes  67.1  82.6  70.0  81.2  77.3  82.6  87.2  86.2  80.1  
 Molluscs  90.3  88.1  105.1  77.8  79.6  91.2  83.5  97.1  79.2  
Aquaculture  268.5  354.6  472.5  581.2  526.7  634.9  530.7  521.0  507.0  
 of which           
  Whiteleg shrimp  -   -   52.9  69.1  60.3  49.0  45.5  57.2  48.3  
 Barramundi  5.7  11.7  14.2  20.0  17.6  20.1  17.0  30.4  29.1  
 Tilapias and other 
cichlids  32.0  34.6  35.1  38.6  42.8  51.6  42.8  35.3  35.4  
  Groupers n.e.i.  -   4.4  3.8  4.6  6.3  6.0  5.4  7.8  8.0  
  Mangrove red 
snapper  4.5  3.4  4.7  5.0  5.2  4.3  5.3  10.3  10.4  
  Torpedo -shaped 
catfishes n.e.i.  21.9  41.5  83.7  63.2  46.8  46.5  50.5  46.1  50.7  
US$ million           
Aquaculturea 373.7  571.6  684.6  856.6  779.9  887.0  708.6  1,023.7  850.2  
 of which           
  Whiteleg shrimp  -   -   165.5  238.5  241.0  232.9  137.5  331.1  262.3  
 Barramundi  21.0  46.3  52.4  80.8  80.7  97.4  70.6  126.8  112.2  
 Tilapias and other 
cichlids  41.7  57.4  59.6  72.9  90.9  121.8  98.0  79.7  76.2  
 Groupers n.e.i.  -   36.2  28.2  37.9  61.1  57.2  47.6  81.1  73.7  
  Mangrove red 
snapper  37.1  17.0  18.7  23.2  32.0  26.7  32.3  62.5  59.5  
  Torpedo -shaped 
catfishes n.e.i.  16.1  52.7  98.9  76.0  62.1  74.6  81.9  73.9  57.4  
a FAO FishStat does not have data for the value of marine catch.  
Source:  FAO FishStat online database. Viewed at: http://www.fao.org/figis  [October 2017].  
                                                
35 Department of Fisheries (2017), Annual Fisheries Statistics 2015 , Table 1.1 . 
36 FAO FishStat online database. Viewed at: http://www.fao.org/figis  [October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.50.   In 2015, there were 56,211 registered fishing vessels in Malaysia, of which nearly 3,000 
were small unpowered vessels, 36,425 were powered by outboard motors and 16,740 by inboard 
motors. The majority of vessels are quite small, less than 39 horsepower ( Table 4.15). The most 
common type of fishing gear for outboard powered vessels is gill/drift nets, followed by hooks and 
lines. For inboard powered vessels, the most common type of gear is trawl nets, followed by 
gill/drift ne ts.37 
Table 4.15 Malaysia's  fishing fleet, 2015  
Horsepower  Inboard  Outboard  
Unpowered   3,046  
Less than 4.9  175 767 
5 to 9.9  624 3,479  
10 to 19.9  1,212  12,124  
20 to 39.9  1,878  8,775  
40 to 59.9  748 7,284  
60 to 99.9  846 3,521  
100 to 149.9  3,398  475 (150 hp plus)  
150 to 249.9  3,418   
250 to 299.9  1,530   
300 to 349.9  858  
350 plus  2,053   
Total  16,740  39,471  
Source:  Department of Fisheries (2017), Annual Fisheries Statistics 2015 , Tables 2.2 and 2.3.1.  
4.1.2.2   Trade  
4.51.   According to UNSD Comtrade, in 2016 Malaysia had a deficit for trade in fish and fish 
products38 with imports of US$916 million and exports of US$662 million. Both imports and 
exports declined in US dollar terms since 2 013 when they were US$1,037 mill ion and 
US$772  million respectively. Exports of crustaceans (mostly shrimps), preparations from fish eggs, 
and frozen fish other than frozen fillets, and molluscs (mostly cuttlefish) represented more than 
three -quarters of exports of fish and fish products . Imports of frozen fish (other than frozen 
fillets), fresh fish (other and fish fillets), molluscs (mostly cuttlefish), and fish fillets represented 
68% of imports ( Table 4.16). 
Table 4.16 Exports and imports of fish and fish products, 2013 -16 
(US$ million)  
 2013  2014  2015  2016  Top 4 partners  
Exports  
Total exports of fish and fish products  772  833  645  662   
of which        
0306 Crustaceans, fit for human 
consumption  353  418  257  212  Singapore; 
Viet Nam; 
Australia; China  
1604 Caviar and caviar substitutes 
prepared from fish eggs  91  103  102  107  Singapore; 
Australia; Hong 
Kong, China, 
Indonesia  
0303 Fish, frozen, excluding fish fillets 
and other fish meat of heading  
03.04.  60  53  64  100  Viet Nam, 
Thailand, China, 
Indonesia  
0307 Molluscs, fit for human 
consumption  78  75  72  89  Viet Nam; Japan; 
Singapore; Korea, 
Rep. of 
0304 Fish fillets and other fish meat  36  40  37  37  Japan; United 
States ; Singapore; 
Australia  
                                                
37 Department of Fisheries (2017), Annual Fisheries Statistics 2015 , Tables 2.2 and 2.3.1 . Viewed at: 
http://www.dof.gov.my/index.php/pages/view/2614  [October 2017].  
38 For the purposes of this paragraph, fish and fish products are those under HS 2012 heading s 02840, 
03, 050800, 050900, 051191, 121229, 1504, 1603, 1604, 1605, and 230120.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   2013  2014  2015  2016  Top 4 partners  
Imports  
Total imports of fish and fish products  1,037  1,102  923  916   
of which        
0303 Fish, frozen, excluding heading 
0304 254  235  203  227  China; Viet Nam; 
Indonesia; Japan  
0302 Fish, fresh or chilled, excluding 
heading 0304  202  194  175  146  Indonesia; 
Norway; Thailand; 
Japan  
0307 Molluscs, fit for human 
consumption  77  84  162  130  China; Indonesia; 
Japan; Viet Nam  
0306 Crustaceans, fit for human 
consumption  215  306  101  120  Indonesia; China; 
India; Myanmar  
0304 Fish fillets and other fish meat  90  98  100  102  Viet Nam; 
Indonesia; China; 
United States  
Source:  UNSD Comtrade.  
4.1.2.3   Policy  
4.52.   The Department of Fisheries in the MOA is responsible for development and implementation 
of policy and legislation, including management of fisheries and related matters. The Department 
also provides technical support for marine and freshwater fisheries and aquaculture. In addition, 
there are several agencies responsible for spe cific aspects of fisheries and aquaculture:  
 Under the Department, the Fisheries Research Institute of Malaysia is responsible for 
research;  
 The Fisheries Development Authority of Malaysia is responsible for promoting and 
developing fishery enterprises and marketing along with the Fishermen's Associations 
and Fisheries Cooperatives;  
 The Malaysia Maritime Enforcement Agency is responsible for t he protection of the 
Malaysian Maritime Zone including air and coastal surveillance, management of 
maritime training institutions, and maritime search and rescue; and  
 For Sabah, the Department of Fisheries Sabah is responsible for developing polic ies 
for the state. 
4.53.   The principal legislation on fisheries is the Fisheries Act No. 317 of 1985 and accompanying 
regulations. Under the Act, a licence from the Department of Fisheries is required for all fishing 
activity and marine water -based aquaculture projects.  
4.54.   Under the Fisheries Act, the Minister of Agriculture and Agro -based Industry may make 
regulations relating to the management and development of fisheries resources, including: 
licensing of vessels; specifications for vessels; fishing gear licensing; prohi bited fishing methods, 
areas, and species; closed seasons; etc. Fishing areas are defined by zones defined by distance 
from shore with fishing in each zone restricted by size and type of vessel ( Table 4.17 ). In-land 
aquaculture regulations are issued by th e authorities of the states.  
4.55.   The general policies and strategies for fisheries are set out in the Economic Transformation 
Programme, the National Agro food Policy 2011 -2020 (NAP), and the 11th Malaysia Plan (11MP) for 
2016-2020 ( Section 4.1.1.3). In additio n, specific policies for the subsector are set out in the 
Strategic Plan of the Department of Fisheries 2011 -2020, the National Plan of Action (NPOA) for 
the Management of Fishing Capacity 2015 -2020, and the NPOA to Prevent, Deter and Eliminate 
Illegal Unr eported and Unregulated Fishing . 
  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 4.17 Fishing zones in Malaysia  
Up to 1 June 2014  A B C C2 C3 
Distance from 
shore  Nautical 
miles 0-5 5-12 12-30 30 to EEZ  High seas  
Vessel size  GRT Less than 40  Less than 40  40-70 70 plus  70 plus  
Vessel type   Traditional 
gear Trawlers/ 
purse seiner  Trawlers/ 
purse seiner  Trawlers/ 
purse seiner  Purse 
seiners/tuna 
long line  
From 1 June 2014 for west 
coast Peninsular Malaysia  Refugiaa A B C C3 
Distance from 
shore  Nautical 
miles 0-1 1-8 8-15 15+ High seas  
Vessel size  GRT  Less than 40  Less than 40  40 plus  70 plus  
Vessel type   Aquaculture  Traditional 
gear/ 
anchovy 
purse seine  Trawlers/ 
purse 
seiners  Trawlers/purse 
seiners  Purse 
seiners/tuna 
long line  
a Kedah, Pulau Pinang, Perak, and Selangor only.  
Source:  Department of Fisheries online information. Viewed at: 
http://www.dof.gov.my/index.php/pages/view/42  [October 2017]; Department of Fisheries (2015), 
National Plan of Action for the Management of Fishi ng Capacity in Malaysia (Plan 2) , p. 31, and 
Presentation to the Stakeholders Consultation on Regional Cooperation in Sustainable Fisheries 
Development Towards the ASEAN Economic Community 1 March 2016, Bangkok.  
4.56.   Among the strategies for moderni zing agricu lture in 11MP, is the statement that fishers' 
associations will be given incentives, through special schemes, to assist their members in buying 
deep-sea vessels.39 The NAP includes a section on sustainable moderni zation and transformation of 
the capture fisheries industry which projects an increase in marine catch to 1.76 million tonnes by 
2020, of which 620,000 tonnes would be from deep sea fishing. The NAP also emphasises the 
sustainable development of capture fisheries through effort and gear restrictions  and compliance 
with international measures such as the FAO Code of Conduct for Responsible Fisheries 1995, 
Agreement on Port States Measures to Prevent, Deter and Eliminate Illegal, Unreported and 
Unregulated Fishing (IUU Fishing) and EC Regulation 1005/2 008.40  
4.57.   The fishing capacity plan is the second such plan and highlights a number of strategies to 
improve sustainable management of fisheries by addressing current problems including:  
 overcapacity is to be addressed through a moratorium on new licences for  vessels and gear 
in the coast zone, regular assessment of fishing capacity and resources, adjustment of effort 
to match the maximum sustainable yield, and cancellation of licences for non -performing 
vessels;  
 overfished resources are to be managed through the establishment of fish refuges, closed 
seasons for specified areas, a revised zoning system ( Table 4.18), and an individual quota 
system based on total allowable catches;  
 gear specifications are to be developed, the impact of management measures assessed, 
data collection and dissemination impro ved, regulations on foreign fishers working on local 
vessels strengthened;  
 monitoring and surveillance are to be improved, including measures to prevent fishing in 
prohibited zones, and foreign vessels in the EEZ; and  
 public awareness of the need for conservation and management  is to be i mprov ed, including 
stakeholder participation in resource management activities.41 
4.58.   According to the authorities, the Plan to Prevent, Deter and Eliminate IUU Fishing was 
developed in accordance with the International Pla n of Action to Prevent, Deter, and Eliminate 
                                                
39 Prime Minister's Department (2015), Eleventh Malaysia Plan 2016 -2020 – Anchoring Growth on 
People , p. 8-25. 
40 Ministry of Agriculture and Agro -Based Industry (2011), Nationa l Agrofood Policy 2011 -2020, 
pp. 52-55. 
41 Department of Fisheries (2015), National Plan of Action for the Management of Fishing Capacity in 
Malaysia (Plan 2).  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Illegal, Unreported and Unregulated Fishing (IPOAIUU) which was adopted by the Committee on 
Fisheries and endorsed by the FAO in 2001. The Plan notes that Malaysia currently applies a vessel 
monitoring system (V MS), applies reporting requir ements  for catch and effort, monitors fish 
landings, and conducts vessel and gear inspections. Furthermore, catch and effort reports are 
compared to the VMS as well as landing and trade data to confirm accuracy. As all vessels and 
fishing gear must be licensed and all vessels  must carry identification markings, inspections can 
confirm compliance with the terms of the licences. All foreign fishing vessels are required to notify 
the Malaysian authorities before entering Malaysian waters and may only fish or undertake 
fishing -related activities if authorized to do so under an international fishery agreement between 
Malaysia and the government of the other country, or between Malaysia and the international 
organization to which such a vessel belongs to or to which such vessel is registered, and under a 
permit issued by the Director -General of Fisheries.  
4.59.   From 2006 to 2015, on average, 800 cases per year were taken  to the courts for offences 
committed by domestic fishing vessels under t he Fisheries Act. In addition, a small number of 
cases were taken to the courts against foreign vessels (two were detained or prosecuted in 2015), 
one of which resulted in a fine of RM 1.595 million and seizure of the cargo , which was auctioned 
for RM 5 mi llion. 
4.60.   The Government provides a number of supports to the fisheries sector including fuel 
subsidies, living allowances, and catch incentives:  
 The living allowances were increased in 2015 from RM 200 per month: to RM 300 for fishers 
fishing in Zone A; and  to RM 250 for Zones B and C;  
 The catch incentives for fishers vary with the Zone and exclude by -catch;  
 Zone A (petrol): RM 0.10 per kg up to RM 150 per month;  
 Zone A (diesel): RM 0.10 per kg up to RM 350 per month;  
 Zone B: RM 0.10 per kg up to RM 750 pe r month;  
 Zone C: RM 0.10 per kg up to RM 1,500 per month; and  
 Zone C2: RM 0.20 per kg up to RM 5,000 per month.  
Table 4.18 Government spending on fisheries , 2011 -16 
(RM million)  
 2011  2012  2013  2014  2015  2016  
Fuel subsidy  523.4  559.2  534.4  374.9  41.8 16.0 
Living allowances  37.4 38.9 41.3 37.4 50.7 39.3 
Catch incentives  22.9 27.5 30.6 27.6 9.8 4.8 
Other support programmes  24.7 7.6 13.0 8.2 5.6 7.9 
Source:  Malaysian Authorities.  
4.61.   According to one report, the value of the subsidies varies depending on the type of fishing 
and the zone of operation. For Zone A fishers, 38% of an average total income  of RM 2,118 per 
month is from subsidies (18% of income is from the fuel subsidy). For Zone C fishers, 28% of the 
average total income of RM 20,881 is from subsidies (24% of income is from the fuel subsidy).42 
The authorities also pointed out that the fuel sub sidy is only available to eligible fishers in Zones A, 
B, and C and that larger commercial vessels are not eligible.  
4.62.   For aquaculture, state governments designate Aquaculture Industrial Zones (both on land 
and in water) for commercial -scale aquaculture pro jects, including seaweed. In 2015, there were 
49 sites covering more than 28,000 ha. The Federal Government's role is focused on general 
planning and technical support.  
                                                
42 Ali J, Abdullah H, Noor MSZ, Viswanathan KK, Islam GN (2017), The Contribution of subsidies on the 
Welfare of Fishing Communities in Malaysia , International Journal of Economics and Financial Issues 7(2),  
p. 641 -648. Viewed at: http://www.econjournals.com/index.php/ijefi/article/view/4292  [October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.2  Mining and Energy  
4.2.1   Mining and quarrying  
4.63.   According to the Department of Mineral and Geos cience Malaysia, minerals and mining (not 
including petroleum and natural gas) represented about 0.5% of GDP, or RM  5,389  million, in 
2016, having increased steadily since 2010 (RM 3,653 million ). However, it remains small 
compared to crude oil and natural  gas which were close to RM  100 billion in 2016. In 2016, there 
were 11,081 people engaged in the mineral mining and quarrying subsectors, with 5,029 in the 
mineral mining subsector and the others in quarrying. Among minerals, bauxite was biggest in 
2015 b ut declined sharply in 2016, reportedly as a result of a government moratorium which was 
first imposed in January 2016 for three months and extended several times, most recently in June 
2017 for a further six months. The moratorium was not a total ban on b auxite -related activities as 
transport to ports and export from bauxite stockpiles was permitted  (Table 4.19). 
Table 4.19 Mining and quarrying production , 2010 -16 
  2010  2011  2012  2013  2014  2015  2016  
Contribution to GDP          
Other mining & 
quarrying and 
supporting services  RM million  4,000  6,257  5,762  6,928  7,375  7,191  5,389  
Minerals          
Bauxite  000 tonnes  124 188 122 209 963 7,165  343 
RM million  16  19  10  17  77  832  35  
Gold kg 3,766  4,219  4,625  3,823  4,308  4,732  2,249  
RM million  397  650  740  535  555  781  389  
Tin tonnes  2,668  3,340  3,725  3,697  3,777  4,125  4,158  
RM million  168  234  242  259  257  285  262  
Iron ore  000 tonnes  3,558  8,006  12,144  12,134  9,615  1,625  1,914  
RM million  424  1,616  1,822  1,699  2,253  246  289  
Energy minerals          
Coal 000 tonnes  2,397  2,916  2,951  2,907  2,688  2,559  1,333  
RM million  262 347 441 523 400 307 316 
Quarrying          
Aggregates  000 tonnes  101,809  118,510  110,339  153,173  136,162  158,744  133,073  
RM million  1,637  2,011  1,863  2,528  2,440  2,766  2,263  
Limestone  000 tonnes  22,431  21,832  23,534  18,069  23,948   24,164  25,431  
RM million  188  203  236  315  351  378  249  
Sand & gravel  000 tonnes  30,698  37,339  28,592  35,577  29,862  40,578  45,820  
RM million  449  619  460  553  495  729  833  
Silica sand  000 tonnes  932 1,340  932 1,244  1,923  9,003  5,408  
RM million  36  66  62  53  100  395  249  
Source:  Malaysian authorities ; and Malaysianminerals.com. Viewed at: 
http://malaysianminerals.com/index.php?option=com_content&task=blogcategory&id=1&Itemid=11
6 [October 2017].  
4.64.   In trade terms, exports of non -energy minerals and coal (HS headings 25, 26, and 
2701-2708) tend to vary considerably from one year to another as exports of bauxite (HS 2606) 
were US$2 million in 2013, US$707 million in 2015, and US$151 million in 2016. In addition, some 
products are imported and exported in similar quantities and values, such as copper ores and 
concentrates and iron ores and concentrates ( Table 4.20). 
Table 4.20 Imports and exports of non -petroleum minerals , 2013 -16 
(US$ million)  
HS 
heading  Imports  2013  2014  2015  2016  
2701 Coal, briquettes  1,855  1,568  1,313  1,433  
2601 Iron ores and concentrates, including roasted iron 
pyrites  345 486  576  756 
2609 Tin ores and concentrates  362 410 290  296 
2707 Products from distillation of coal tar, mostly aromatic 
constituents  122 204 562 208 
2616 Precious metal ores and concentrates  122 12 71 128 
2523 Portland cement, aluminous cement, slag cement, 
supersulphate cement and similar hydraulic cements, 
whether or not coloured or in the form of clinkers  224 223 181 95  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  HS 
heading  Imports  2013  2014  2015  2016  
2704 Coke and semi -coke 58 64 110 89 
2603 Copper ores and concentrates  113 50 204  87 
HS 
heading  Exports  2013  2014  2015  2016  
2601 Iron ores and concentrates, including roasted iron 
pyrites  464  425 514  814 
2707 Products from distillation of coal tar, mostly aromatic 
constituents  126 293 814 527 
2616 Precious metal ores and concentrates  43 50 31 177 
2606 Aluminium ores and concentrates  2 106 707 151 
2603 Copper ores and concentrates  46 62 110  83 
2523 Portland cement, aluminous cement, slag cement, 
supersulphate cement and similar hydraulic cements, 
whether or not coloured or in the form of clinkers  160 138 75 77 
2517 Pebbles, gravel, broken or crushed stone  46 37 44 53 
2521 Limestone used for the manufacture of lime or 
cement  35 45 46 48 
Source:  UNSD Comtrade.  
4.65.   The Ministry of Natural Resources and Environment is responsible for general policy, and  for 
preparing and implementing legislation relating to mining and quarrying. In 2009, the National 
Mineral Council and the National Forestry Council were disbanded and the National Land Council 
took over their responsibilities to oversee development of the se ctor and coordinate policy among 
central and state authorities. Policy is set out in the National Mineral Policy of January 2009 which 
aims for the expansion of the sector through a conducive business climate for exploration and 
extraction while empha sizing sustainable development and environmental protection.43 The 
Eleventh Malaysia Plan also emphasi zes the sustainable development of minerals.44 
4.66.   The principal laws relating to minerals are the Mineral Development Act No. 525 of 1994 
(where "mineral" does not include petroleum or rock material ), the Petroleum Mining Act No. 95 of 
1966 (covering petroleum)  and the National Land Code Act No. 56 of 196545 (covering rock 
material ). In addition , each state has its own legislation relating to mining activities.  
4.67.   One o f the objectives of the National Mineral Policy is the efficient, effective and transparent 
implementation of harmoni zed state mineral laws and the application by the states of a model 
mineral agreement between the state and the investor. All the states in  Malaysia, except Sarawak, 
have promulgated new mineral laws based primarily on the template , the content of which was 
approved by the National Land Council. In Sarawak , the existing law was amended to bring it into 
line with the National Minerals Policy. Under these state laws, each state may grant licences for 
prospecting, exploration, and mining.  
4.68.   Exploration licences may be granted for areas between 400 and 20,000 ha for a maximum 
of 10 years with a possible  extension of 5 years. Prospecting licences may  be granted for periods 
of up to 2 years with a possible extension of 2 years. Mining licences may be granted for the 
expected life of the mine or 21 years, whichever is shorter , with the possibility of renewal. An 
environmental impact assessment is requir ed for mines of 250 ha or more ( Table 4.21 ). There are 
no restrictions on foreign companies participating either in their own right, through equity in a 
local company, or through joint ventures with a local company or companies.  
  
                                                
43 Ministry of Natural Resources and Environme nt (2009), National Mineral Policy 2 – Towards 
Sustainable Mining . 
44 Prime Minister's Department (2015), Eleventh Malaysia Plan 2016 -2020 – Anchoring Growth on 
People, p. 6 -21. 
45 Under the National Land Code, rock material is defined as: "any rock, stone, gravel, common sand, 
common earth, common laterite, loam, common clay, soil, mud, turf, peat, coral, shell, and any other rock 
materials within or upon any land, and includes processed materials therefrom , other than minerals defined 
under any written law relating to mining which is for the time being in force ". WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 4.21 Mineral licences issue d, 2013 -16 
 Exploration  Prospecting  Mining lease  Proprietary 
mining  
2013 2 40 246 134 
2014 4 47 232 111 
2015 0 1 333 250 
2016 3 8 233 113 
Source:  Malaysian authorities.  
4.69.   Under the states ' mineral laws there are no provision s relating to appeals if the state 
authority has refused an application for an exploration, prospecting or mining licence ; a new 
application is required. For renewal of a mining lease, the applicant may appeal to the sta te 
authority if dissatisfied with the authority's decision. In all cases, an appeal to the courts is 
possible.  
4.70.   The annual revenue tax rate imposed on mining corporations having a paid -up capital of 
more than RM 2.5 million is 24% (with effect from year of assessment 2016). As for corporations 
having a paid -up capital of less than RM 2.5 million, the revenue tax rate is 18% (with effect from 
year of assessment 2017) for the first RM 500,000 and 24% for the remaining balance (with effect 
from year of assessme nt 2016). Generally, mining operators are required  to pay 5% of the value 
of the mineral extracted to the relevant states on a monthly basis. However, such rates may vary 
according to the type, weight and volume of the minerals extracted, as assessed by th e state.46 
4.2.2   Energy  
4.71.   Energy supply and consumption have continued to increase over the 2010 to 2016 period 
both in total and per capita. The main source of energy supply is natural gas, followed by 
petroleum and coal. Supply from renewable sources (including b iodiesel and hydropower) did 
increase during this period and accounted for 4.7% of total supply in 2016. Transport is the main 
energy consumer, accounting for  about 45% of total consumption ( Table 4.22).  
Table 4.22 Primary energy supply and consumption , 2010 -16 
(Thousand tonnes oil equivalent (ktoe))  
 2010  2011  2012  2013  2014  2015  2016a 
Total  primary supply  
Natural gas  35,447  35,740  38,648  39,973  40,113  39,364  40,702  
Petroleum  25,008  26,903  29,502  32,474  33,422  29,165  30,157  
Coal and coke  14,777  14,772  15,882  15,067  15,357  17,406  17,998  
Biodiesel  0 24 115 188 300 389  402  
Hydropower  1,577  1850 2,150  2,688  3,038  3,582  3,704  
Biomass  0 0 183 297 181 189  195  
Biogas  0 0 4 6 12 18  19  
Solar 0 0 11 38 63 75  78  
Total  76,809  79,289  86,495  90,731  92,486  90,188  93,254  
Final energy consumption by fuel type  
Natural gas  6,254  8,515  10,206  10,076  9,641  9,566  9,910  
Petroleum products  24,403  23,922  27214  29,191  29,517  28,699  29,732  
Coal and coke  1,826  1,759  1,744  1,539  1,709  1,778  1,842  
Biodiesel  0 24 115 188 300 389  403  
Electricity  8993 9,235  10,011  10,590  11,042  11,375  11,785  
Total  41,476  43,455  49,290  51,584  52,209  51,807  53,672  
Final energy consumption by sector  
Industrial  12,928  12,100  13919  13,496  13,162  13,989  14,493  
Transport  16,828  17,070  19,757  22,357  24,327  23,435  24,279  
Residential and commercial  6,951  6,993  7,065  7,403  7,459  7,560  7,832  
Non-energy use  3,696  6,377  7,497  7,277  6,217  5,928  6,141  
Agriculture  1,074  916 1,053  1,051  1,045  895  927  
Note:  a: Estimate.  
Source:  Malaysian authorities.  
                                                
46 Athsani RAA (undated), Legal framework of mining industry in Malaysia , AZMI & Associates. View ed 
at: http://www.inhousecommunity.com/wp -content/uploads/2016/07/v10i4_JURIS_Malaysia.pdf  
[October  2017].  
Malaysianminerals.com online information. Viewed at: 
http://malaysianminerals.com/index.php?option=com_content&task=view&id=247&Itemid=180  
[October  2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.72.   Energy policy relating to upstream  oil and gas is the responsibility of the Economic Planning 
Unit (EPU) and PETRONAS. The Malaysia Petroleum Resources Corporation, created in 2011 under 
the Prime Minister's Office, was set up to assist investment by domestic and international oil and 
gas companies with the objective of making Malaysia the principal oil hub for the Asia -Pacific 
region.  
4.73.   Other aspects of energy policy are the responsibility of the Ministry of Energy, Green 
Technology and Water. The Energy Commission of Malaysia, which reports  to the Ministry and the 
EPU, is responsible for regulating the electricity supply and piped gas supply industries in 
Peninsular Malaysia and Sabah and the State Electrical Inspectorate is responsible for regulating 
the electricity sector in Sarawak.  
4.74.   Under  the Economic Transformation Plan , a number of Entry Point Projects (EPPs) have 
been identified which aim to increase the value of the oil, gas, and energy sector against a forecast 
decline of 2% per year in oil and gas production as resources are exhauste d. The EPPs are:  
 sustaining oil and gas production through rejuvenation of existing fields, development 
of small fields, and by intensifying exploration;  
 enhancing downstream growth by building a regional storage and trading hub and 
increasing demand in P eninsular Malaysia for gas, and increasing petrochemical 
output;  
 making Malaysia a hub for oil field services by attracting multinational oil companies 
to set up in Malaysia and make it their regional base for operations, promoting export 
by domestic compa nies, and developing technological capabilities and capacity 
through strategic partnerships and joint ventures; and  
 building a sustainable energy platform for growth through  improv ed energy efficiency 
and the development of alternative energy sources by in creasing solar, nuclear, and 
hydroelectric power capacity.47  
4.75.   The Eleventh Malaysia Plan (MP11) emphasi zes energy efficiency, the development of 
renewable energy sources, more efficient recovery of gas and oil, and improvement in 
infrastructure. It also sta tes that piped gas and compressed natural gas subsidies are to be 
reduced while petrol and diesel prices will continue to be regulated. The National Energy Efficiency 
Action Plan (NEEAP) 2016 -2025 was approved by the Government in January 2016 with several  
initiatives, including:  
 promotion of 5 -star rated appliances;  
 Minimum Energy Performance Standards (MEPS);  
 energy audits and energy management in buildings and industries;  
 Promotion of cogeneration facilities; and  
 energy efficiency building design.  
4.2.2.1   Petrol eum and gas  
4.76.   Petroleum and gas remain very important to the economy of Malaysia,  as crude oil and 
condensate, natural gas, and refined petroleum products contributed about 10.5% to GDP and 
about 14% to government revenues in 2016 (down from 12.7% and 30% re spectively in 2014).48 
New discoveries and improved extraction mean reserves of crude oil are keeping pace with 
production and proved reserves were estimated to be 5.8 billion bbl at end -2014 compared to 
6.1 billion bbl in 1993. Gas reserves, on the other h and, have continued to increase, reaching 
                                                
47 PEMNDU (2010), Economic Transformation Programme – A Roadmap For Malaysia, pp 175 -178. 
48 Department of Statistics Malaysia (2017), Annual Gross Domestic Product 2010 -2016, 19 May.  
Fitch Ratings (2016), Malaysia Budget Signals Stability Despite Low  Oil Revenue , [Press Release] 
25 October. Viewed at: https://www.fitchratings.com/site/pr/1013668  [October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  52 trillion standard cubic feet (scf) in 2014 even though production has continued to increase 
(Table 4.23).49 
Table 4.23 Oil and gas production and use , 2010 -16 
 2010  2011  2012  2013  2014  2015  2016  
Oil 
Contribution to GDP (RM million)         
Crude and condensate  46,171  51,299  52,654  51,429  51,906  46,853  46,367  
Refined petroleum products  28,022  33,881  37,325  36,468  38,156  34,151  32,288  
Reserves (billion bbl)  5.799  5.858  5.954  5.850  5.792  5.907  n.a. 
Production (bbl per day)  638 570 586 576 603 654 667 
Consumption (bbl per day)  690 726 760  803 802 814 829 
Gas 
Contribution to GDP (RM million)  39,969  40,596  44,001  46,658  51,102  49,561  50,248  
Reserves (trillion scf)  41.7 42.9 43.1 50.1 52.0 n.a. n.a. 
Production (billion cubic m)  5,930  5,931  6,007  6,271  6,331  6,136  6,536  
Consumption (billion cubic m)  29.6 34.8 35.5 40.3 42.2 41.8 43.0 
n.a. Not available.  
Note:  bbl – barrel.  
 scf – standard cubic feet.  
Source:  Malaysian authorities; Energy Commission (2017), Malaysia Energy Statistics Handbook 2016 ; and 
BP (2017), BP Statistical Review of World Energy – June 2017 . 
4.77.   Malaysia has  a trade surplus in gas and petroleum products, although it has considerable 
imports, some of which are refined in Malaysia and exported. Over the period 2013 -2016, the total 
value of exports of petroleum and petroleum products, and natural gas50 declined f rom 
US$51  billion to US$26 billion , while the value of imports declined from US$31 billion to 
US$16  billion. However, import and export quantities increased over this period ( Chart 4.3) as the 
fall in price s for oil and gas drove the decline in trade values. In 2016, the main destinations for 
exports of petroleum, petroleum products and natural gas were Singapore, Japan, China, and 
Australia.  
                                                
49 Energy Commission (2017), Malaysia Energy Statistics Handbook 2016. BP (2017), BP Statistical 
Review of World Energy – June 2017.  
50 HS 2012 headings 270900 to 271500.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Chart 4.3 Exports and imports of petroleum and petroleum productions, and natural gas , 
2013 -16 
(US$ million, 000 tonnes)  
 
Note:  HS 270900 Crude oil.  
 HS 271012 Petroleum oils, light oils and preparations.  
 HS 271019 Petroleum oils, other.  
 HS 271111 Natural gas.  
 Other – all other tariff lines under HS headings 270900 to 271500.  
Source:  UNSD Comtrade.  
4.78.   Under the objective to make Malaysia the principal hub for oil and gas in the Asia Pacific, 
the Johor Petroleum Development Corporati on (JPDC) was established in 2012 as a wholly  owned 
subsidiary of the Malaysian Petroleum Resources Corporation (MPRC). The JPDC is responsible for 
planning and coordinating oil and gas development in the state of Johor which includes the 
development of a site for the oil refineries, naphtha crackers, and petrochemical plants as well as 
WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  liquefied natural gas (LNG) import terminals and a regasification plant. Pengerang Deepwater 
Terminal for petroleum, which provides tankage facilities for handling, storing,  blending and 
distribution of crude oil, petroleum and LNG products, is a joint venture between the DIALOG 
Group of Malaysia, Royal Vopak of the Netherlands, and Johor state. In addition, two other 
locations have been identified in Johor for storage of pet roleum and petroleum products: Tanjung 
Bin for 3 million m3 and Tanjung Langsat for 2 million m3.51 
4.79.   Petroliam Nasional Berhad (PETRONAS) is a state -owned enterprise founded in 1974 under 
the Malaysian Companies Act of 1965. PETRONAS is a vertically integrat ed oil company with 
operations in many countries. In FY2016, its total revenue was RM 195.1 billion, of which 
RM 68.9 billion was from international operations, RM 71.5 billion from exports, and 
RM 54.7 billion from domestic operations. These were lower th an in 2015 when total revenues 
were RM 247.7 billion. PETRONAS 's contribution to federal and state governments in Malaysia 
totalled RM 36.9 billion in 2016, made up of dividends, taxes, cash payments and export duties, all 
of which declined relative to 201 5 when the total contribution was RM 52.7 billion ( Chart 4.4). In 
2016, dividend pay -outs to the Government were more than 100% of earnings after tax and 
non-controlling interest. In addition, revenue foregone resulting from regulated prices for gas was 
RM 3.1 billion in 2016.52  
Chart 4.4 PETRONAS ' contribution to government and state revenues , 2012 -16 
(RM billion)  
 
Source:  PETRONAS Annual Report 2016.  
4.80.   Under the Petroleum Development Act, PETRONAS is vested with the entire ownership in, 
and the exclusive rights, powers, liberties and privileges of exploring, exploiting, winning and 
obtaining petroleum whether onsh ore or offshore Malaysia. Exploration and exploitation of 
petroleum and gas takes place through Petroleum Arrangement Contracts (PACs), that is, 
Production Sharing Contracts (PSCs) or Risk Service Contracts (RSCs). The PSCs set out the 
arrangements for coo peration between PETRONAS 's subsidiary, PETRONAS Carigali Sdn Berhad 
(PCSB), and the oil company which acts as a contractor for the exploration, development and 
production of petroleum resources in the contract area for the duration of the contract. PCSB h as 
at least 15% equity participation in each PSC depending on the assets offered. At July 2017, 
PETRONAS had over 92 PSCs and 4 RSCs in operation. Investment in downstream oil processing is 
not subject to such contracts and 100% foreign equity is permitted . Another subsidiary of 
PETRONAS is MISC Bhd (62.67% holding) which has a large fleet of energy transport vessels 
(Section 4.3.4).  
                                                
51 JPDC online information. Viewed at: http://www.jpdc.gov.my/  [October 2017] and  
Oxford Business Group (2016), The Report – Malaysia 2016 , p. 117.  
52 PETRONAS (2017), Annual Report 2016 – Building Strength through Adversities, p. 28.  
Note: In June 2017, PETRONAS Group changed its accounting policy with respect to revenue reporting and 
inventory valuation for gas trading activit ies. Therefore, the numbers above may differ from those of the 
Annual Report 2016.  
0102030405060708090
2012 2013 2014 2015 2016Contribution to Government and states revenues
Dividends Taxes Cash payments Export dutiesWT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.81.   Under the Petroleum Income Tax Act 1967, upstream petroleum and gas companies are 
subject to 38% tax on income from the sale  of crude oil and natural gas extracted from Malaysia. 
In addition , a royalty rate of 10% is charged on oil production and an export duty of 10% is 
charged on exports of crude oil. A reduced rate of income tax of 25% and a waiver from the export 
duty appli es to marginal fields , along with other incentives such as accelerated capital 
allowances.53 With effect from 30 November 2010, tax incentives are also available to promote 
upstream development and boost the commercialization of hard -to-reach oil fields:  
 reduced tax rate of 25% from 38% for marginal oil fields;  
 accelerated capital allowances of up to five years for marginal oil fields;  
 export duty exemption on oil produced from marginal fields;  
 investment allowance for capital -intensive project s; and  
 Qualif ying Exploration Expenditure transfer between non -contiguous petroleum agreements.  
4.82.   Income derived from downstream petroleum activities, such as the refining of petroleum or 
the processing of petroleum products, is taxed at the statutory rate of 24%, with e ffect from year 
of assessment 2016.  
4.83.   While PETRONAS is the regulator for upstream oil and gas, the Ministry of Domestic Trade, 
Cooperatives and Consumerism (MDTCC), the Ministry of International Trade and Industry (MITI), 
and the Energy Commission are respo nsible for regulating downstream activities. MDTCC issues 
permits for marketing and distribution of petroleum and petroleum products, MITI issues licences 
for the processing and refining of petroleum and the manufacture of petrochemical products, and 
the E nergy Commission regulates the electricity sector and downstream activities of the gas 
industry.  
4.84.   At end -2014, subsidies for liquid fuels, which applied to petrol and diesel were removed, but 
the subsidy for liquefied petroleum gas was maintained. As noted in the last Review, in 2012 the 
subsidy was the equivalent of 51% of actual price for LPG, 28% for RON95 petrol, and 32% for 
diesel.54 Regulated prices are still used based on the Automatic Pricing System (APM) described in 
the last Review55 but without the subsidy element. However, the Government still sets prices 
based on the components of the APM, which are product cost, operation cost as well as profit 
margins for oil companies and petrol stations. Since 30 March 2017, retail prices for petrol and 
diesel have been set on a weekly rather than monthly basis.  
4.85.   The Gas Supply (Amendment) Act 2016 came into effect on 16 January 2017. Under the 
Act, the Energy Commission, with the approval of the Minister, may determine:  
 service prices for regasification, transportation or distribution licensees in respect of the 
utilization of their facilities for regasification, transportation or distribution of gas; and  
 sale prices for retail licensees in respect of the sale or use of g as through the retail 
licensee 's piping system to the premises of a consumer.  
4.86.   Through the Economic Transformation Program me, regulated gas prices to the power sector 
and to Gas Malaysia Bhd (GMB) are being increased by RM 1.50 per mmBtu every six months un til 
the regulated gas prices reach their "reference market price ". The authorities stated that the 
"reference market price " refers to the gas price derived from the LNG indexed formula as agreed 
by relevant stakeholders and is considered as Peninsular Malaysia's wholesale market price in the 
absen ce of competition (para 4.91.  ). Sale prices and service prices are posted on the Energy 
Commission 's website. At August  2017, PETRONAS was the sole importer of natural gas to 
Peninsular Malaysia, although interested parties may apply for the necessary licences to participate 
in the market.  
                                                
53 Ministry of Finance (2015), Petroleum Fiscal Regime – Malaysia’s experience , presentation to 
Conference on Natural Resource Taxation in the Asia -Pacific Region, 11 -13 Augu st, Jakarta. Viewed at: 
http://www.imf.org/external/np/seminars/eng/2015/natrestax/  [October 2017].  
54 WTO document WT/TPR/S/292/Rev.2, 8 April 2014, Section 4.5.1.  
55 WTO document W T/TPR/S/292/Rev.2, 8 April 2014, paragraphs 4.45.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.2.2.2   Electricity  
4.87.   Electricity generation has continued to increase steadily rising from 11 8,933 GWh in 2010 to 
148,776 GWh in 2015. In 2016, coal replaced gas as the main contributor to the electricity 
generation mix ( Table 4.24). Furthermore, consumption of gas for electricity generation is 
expected to decline while coal consumption should increase: in Peninsular Malaysia gas for 
electricity could decline by 12% over 10 years and coal consumption increase from 25.4 million 
tonnes per year in 2016 to over 3 0 million tonnes.56 
Table 4.24 Electricity generation mix, 2010 -16 
(GWh)  
Year Gas Coal Hydro  Diesel  Fuel oil  Other  Total  
2010  61,342  49,401  6,361  726 933 170 118,933  
2011  55,732  52,302  8,056  5,108  4,295  1,576  127,069  
2012  60,992  55,615  9,251  4,344  2,279  1,596  134,077  
2013  71,174  53,663  11,799  1,741  1,571  1,318  141,266  
2014  74,466  53,693  13,540  756 376 995 143,827  
2015  66,919  59,335  15,524  1,516  45 1,226  144,565  
2016a 62,328  65,009  19,163  1,528  27 721 148,776  
a Provisional.  
Source:  Malaysian authorities, and Energy Commission (2017), Malaysia Energy Statistics Handbook 2016 . 
4.88.   There are three electricity networks in Malaysia,  each with its own government -linked 
monopoly transmission company:  
 Peninsular Malaysia accounts for 90% of electricity demand and 87% of generating 
capacity. Peak demand is about 17,788 MW and total capacity is about 22,919 MW. The 
transmission company is Tenaga Nasional Berhad (TNB) which owns and controls the 
grid. The Peninsular Malaysia grid is connected with Thailand (one HVDC 300 MW and 
one AC 123 kV 80 MW), and Singapore (two HVAC 250 MW connectors)57; 
 In Sabah, peak demand is about 945 MW and generation capacity is 1,286 MW. The 
transmission company is Sabah Electricity Sendir ian Berhad (SESB) which owns and 
controls the grid; and  
 In Sarawak, Sarawak Electricity Berhad (SEB) is the generating, transmission, and 
distribution company . Peak demand is 2,819 MW, and generating capacity is 2,244 MW.  
4.89.   The Ministry of Energy, Green Technology and Water is responsible for public policy and 
preparing legislation while the regulator is the Energy Commission. The Sustainable Energy 
Development Authority Malaysia (SEDA) was established under the Sustainable Energy 
Development Authority Ac t No. 726 of 2011 to administer and manage the feed -in tariff 
mechanism as required by the Renewable Energy Act No. 725 of 2011.  
4.90.   As the owner and operator of the grid in Peninsular Malaysia, TNB buys from independent 
power producers (IPPs) (some of which i t partly owns), as well as taking electricity from 
generating plants owned by its subsidiary TNB Generation. The electricity is then sold to licensed 
distributors or direct to some users, such as steel mills. Relations between the parties to the 
system are  based on the Malaysian Grid Code and the Malaysian Distribution Code which are 
mandatory under the electricity Supply (Amendment) Act of 2015. Purchases from IPPs are under 
power purchase agreements (PPAs) and, from TNB Generation , under service level agr eements 
(SLAs). In October 2015, a New Enhanced Dispatch Arrangement (NEDA) was introduced for 
generators with PPAs and SLAs and, from first quarter 2016, for non -PPA generators. The NEDA is 
part of a transition to daily competitive bidding for electricity  and allows sale to TNB at lower 
variable prices compared to those set out in the PPA or SLA. On 17 April 2017, Guidelines for 
NEDA were approved to provide rules and information for the Single Buyer Department, System 
Operator Department and power generat or on the NEDA mechanism.  
                                                
56 Energy Commission (2017), Peninsular Malaysia – Electricity Supply Outlook 2017, p. 17.  
57 Energy Commission (2017), Peninsular Malaysia – Electricity Supply Outlook 2017, p. 35.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.91.   Sales of gas to the power sector by PETRONAS are regulated by the Energy Commission. At 
end-June 2017, gas for the power sector was RM 21.20 per mmBtu while gas for the non-power 
sector (Gas Malaysia Bhd) was RM  23.05  per mmBtu. H owever, both have been increased by 
RM 1.50 per mmBtu every six months (see above) since January 2014 and the subsidy level 
reduced when compared to international benchmark prices ( Table 4.25). 
Table 4.25 Regulated prices for natural gas in Malaysia, Jan uary 2014 -June 2017  
(Prices per mmBtu)  
 Power 
sector  GMB GMB 
customers  Other 
industrial 
customers  Russia in 
Germany  Indonesia 
in Japan  
Regulated prices 
in RM        
Jan-Apr 2014  15.2 14.05  16.07  18.35    
May-Oct 2014  15.2 15.55  19.32  19.85    
Nov 2014 -Jun 2015  15.2 17.05  19.77  21.35    
Jul-Dec 2015  16.7 18.55  21.8 22.85    
Jan-Jun 2016  18.2 20.05  25.53  24.35    
Jul-Dec 2016 19.7 21.55  27.05  25.85    
Jan-Jun 2017  21.2 23.05  26.31  27.35    
Jul-Dec 2017  22.7 24.55  26.46  28.85    
US$ equivalent        
Jan-Apr 2014  4.62  4.27  4.89  5.58  10.80  17.80  
May-Oct 2014  4.73  4.84  6.01  6.17  10.29  16.63  
Nov 2014 -Jun 2015  4.24  4.76  5.52  5.96  8.84  13.14  
Jul-Dec 2015  4.01  4.45  5.23  5.49  6.25  9.90  
Jan-Jun 2016  4.44  4.89  6.22  5.94  4.34  7.51  
Jul-Dec 2016  4.71  5.15  6.46  6.17  4.37  7.37  
Jan-Jun 2017  4.83  5.25  5.99  6.23  5.40  6.51  
Note:  Regulated gas prices were increased in July 2017 but data were not available for international 
comparisons.  
Source:  Secretariat estimates based on:  
 Energy Commission online information . Viewed at: 
http://www.st.gov.my/images/article/industry/2017/TPA/okt/1._Regulated_piped_gas_prices_as_of
_Sep_2017.pdf  [October 2017];  
 IMF Primary Commodity Prices (Russian natural gas border price in Germany a nd Indonesian LNG in 
Japan – simple average monthly prices for the periods) . Viewed at: 
http://www.imf.org/external/np/res/commod/index.aspx  [October 2017]; and  
 OANDA average exchange rates – RM to US$ simple monthly averages . (Viewed at: 
https://www.oanda.com/currency/average  [October 2017].  
4.92.   For electricity from renewable sources, SEDA sets the feed -in tariffs for electricity from  solar 
photovoltaic (PV), biogas, biomass, small -scale hydro plants, and geothermal sources. The feed -in 
tariff varies depending on the source of electricity and the installed capacity, from RM 0.7424 per 
kWh for small solar PV installations to RM 0.24 per  kWh for hydro plants with installed capacity of 
10-30 MW. For solar PV, biogas, and biomass plants, the basic feed -in tariff may be adjusted to 
take account of various factors. These factors include the use of locally produced equipment when 
the adjustmen t is an additional RM 0.05 per kWh.58  
4.3  Services  
4.3.1   General  
4.93.   Private services contributed 51.7% to GDP in 2016 , with wholesale and retail trade the 
largest subsector (15.9%) followed by information and communication (5.5%) and transport and 
storage (3.5%).59 In terms of employment, wholesale trade, retail trade, and repair of motor 
                                                
58 SEDA online information. Viewed at: http://seda.gov.my/  [October 2017].  
59 Department of Statistics, Malaysia (2017), National Accounts - Gross Domestic Product 2016 , 19 May. 
Viewed at: https://www.dosm.gov.my/v1/  [October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  vehicles was the most important with 17.4% of the labour force, followed by accommodation and 
food and beverage service activities with 8.7%  (Table 4.26).60  
Table 4.26 Services contribution to GDP , 2010 -16 
(RM million)  
 2010  2011  2012  2013  2014  2015  2016  
Private Services  420,382  459,182  501,830  536,186  585,518  623,857  668,739  
Utilities  22,173  23,676  25,699  27,443  30,940  31,441  33,208  
Electricity and gas  17,701  18,911  20,703  22,160  25,358  25,521  26,687  
Water, sewerage and waste 
management  4,472  4,765  4,996  5,283  5,582  5,920  6,521  
Wholesale and retail trade   112,771  127,030  135,439  146,447  166,243  182,072  196,151  
Wholesale trade  49,457  58,451  61,702  65,885  75,008  81,751  87,881  
Retail trade  46,503  51,238  55,245  61,279  70,438  78,084  86,201  
Motor vehicles  16,811  17,342  18,492  19,284  20,797  22,236  22,068  
Food & beverage and 
accommodation    21,863  23,970  25,954  28,317  31,342  34,663  38,486  
Food and beverage  16,309  18,140  19,844  21,890  24,481  27,336  30,656  
Accommodation  5,555  5,829  6,110  6,428  6,861  7,328  7,830  
Transportation and storage  28,998  31,034  32,953  34,876  37,194  39,942  42,942  
Land transport  6,675  7,106  7,550  7,977  8,620  9,366  10,184  
Water transport  4,816  5,102  5,268  5,403  5,303  5,430  5,540  
Air transport  4,220  4,383  4,552  4,833  5,085  5,298  5,532  
Port and airport operation  3,896  4,269  4,689  5,033  5,531  6,067  6,652  
Highway operation  4,603  5,035  5,486  5,888  6,458  7,075  7,777  
Support activities for 
transportation  3,527  3,735  3,983  4,230  4,571  4,947  5,351  
Postal and courier   1,261  1,404  1,424  1,512  1,626  1,758  1,907  
Information and 
communication  39,513  42,667  46,666  51,097  56,425  62,107  67,598  
Information    5,423  5,417  5,828  6,347  6,967  7,332  7,704  
Communication  26,231  28,782  31,816  35,072  38,734  42,881  47,168  
Computer services  7,859  8,469  9,022  9,679  10,723  11,893  12,725  
Finance  47,685  49,114  52,229  54,017  56,079  56,885  58,149  
Monetary intermediation  43,420  44,464  47,065  48,478  50,101  50,860  52,138  
Other financial 
intermediation and activities 
auxiliary to finance  4,265  4,650  5,164  5,539  5,977  6,025  6,012  
Insurance  13,893  15,227  17,824  18,373  19,301  19,264  20,638  
Insurance and pension 
funding  13,509  14,800  17,365  17,878  18,802  18,748  20,104  
Activities auxiliary to 
insurance  384  428  459  494  499  516  534  
Real estate  11,797  12,537  13,464  14,497  15,764  17,093  18,480  
Business services  20,564  22,239  24,528  27,106  29,894  32,760  35,906  
Professional, scientific and 
technical   13,679  14,815  16,556  18,368  20,049  21,825  23,892  
Administrative and support 
services  6,885  7,424  7,971  8,739  9,845  10,935  12,014  
Owner occupied dwelling  16,034  16,624  17,044  17,684  18,486  19,488  20,565  
Community, social and 
personal services  19,686  21,583  23,317  25,319  27,158  29,380  31,556  
Private health services  5,263  5,705  6,201  6,720  7,310  8,004  8,759  
Private education services  5,906  6,457  7,046  7,623  8,282  9,031  9,813  
Other private services  8,517  9,420  10,070  10,976  11,567  12,345  12,984  
Source:  Malaysia Department of Statistics.  
4.94.   As noted in the previous Review, Malaysia had been in the process of autonomously 
liberalizing foreign equity restrictions in several services sectors. During the 2012 -2017 period, 
several of the measures foreseen in the last Review were implemented. According to the Eleventh 
Malaysia Pla n, in 2012, 18 services subsectors were liberalized and up to 100% foreign equity 
participation is now allowed for wholesale and retail trade, healthcare, professional services, 
environmental services, courier, and education subsectors. However some limits  remain for other 
sectors, including telecommunications, financial services, and transport.  
4.95.   The Malaysia Services Development Council (MSDC) provides guidance and direction for a 
coordinated approach towards the development of the services industry. The MS DC is chaired by 
the Minister of International Trade and Industry and comprises representatives from the relevant 
government ministries, PEMUDAH, PEMANDU, and the private sector.  
                                                
60 Department of Statistics, Malaysia (2017), Labour Force Survey Report – 2016, April. Viewed at: 
https://www.dosm.gov.my/  [October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.96.   As part of ASEAN, Malaysia is a party to several trade agreements with servic es 
commitments including with Australia and New Zealand, China, India, and the Republic of Korea. 
In addition , Malaysia has signed bilateral trade agreements with services chapters with Japan, 
Pakistan, New Zealand, India, and Australia.  
4.3.2   Financial services  
4.97.   The financial sector in Malaysia comprises  the banking system, the insurance sector and 
capital markets. During the period under review, the sector 's contribution to GDP declined slightly 
from 7.1% of GDP in 2013 to 6.4% of GDP in 2016, while its share of employment stayed steady 
at around 2.4% of total employment during the same period. In terms of assets, banks continue to 
dominate, accounting for over 50% of the sector 's assets in 2016. The sector 's total assets 
exceeded 200%  of GDP in 2016.  
4.98.   The central bank, the Bank Negara Malaysia (BNM), is responsible for supervising both 
conventional and Islamic banking institutions, the major development financial institutions (DFIs), 
insurance companies, and takaful (Islamic insurance) operators. The Secu rities Commission  
Malaysia  (SCM) supervises and regulates capital market intermediaries, which include fund 
management companies, broker -dealers, and the securities and derivatives market. Investment 
banks are supervised and regulated by the BNM and the SC M. The Labuan International Business 
and Financial Centre is supervised by the Labuan Financial Services Authority (LFSA).  
Banking sector  
4.99.   The banking sector in Malaysia consists of both conventional and Islamic institutions.61 At 
the end of 2016, the conven tional banking sector consisted of 54 institutions. According to the 
IMF, strong regulatory oversight coupled with restructuring of the sector has resulted in strong 
growth. Total assets rose from RM 2,036 billion in December 2013 to over RM 2,519 billion at the 
end of July 2017, while bank deposits increased from RM 1,525 billion to RM 1,725 billion over the 
same period.62  
4.100.   Furthermore, during the review period, lending also rose to RM 1,549 billion in July 2017, 
fuelled  mainly by increased lending to the h ousehold sector, while net -impaired loans (NIL) as a 
proportion of total loans declined to 1.2% in December 2016 from 1.3% in December 2013. 
However, provisioning for NILs declined to 86.5% in December 2016 compared with 99.6% in 
December 2013. The a ggrega te net profit of the banking sector was around RM 32 billion in 2016. 
Furthermore, net return on assets (ROA) and net return on equity (ROE) remained steady during 
the review period ( Table 4.27). According to BNM, recent bank sector profits have been driven by 
treasury operations and strong financing growth from Islamic banking operations. Banks in 
Malaysia continue to be well capitali zed, with a common equity tier 1 ca pital ratio of 13.1%, tier 1 
capital ratio of 14% and total capital ratio of 16.5% in December 2016. These  ratios are 
considerably higher than the regulatory requirements under Basel III63 and the minimum 
requirements in Malaysia.64  
Table 4.27 Financial sector indicators, 2013 -16 
 2013  2014  2015  2016  
 % (or otherwise stated)  
Banking system      
 Total capital ratioa 14.9 15.9 16.6 16.5 
 Tier 1 capital ratioa 13.5 14 14.2 14 
 Common equity tier 1 capital ratioa 12.6 13.3 13.3 13.1 
 Return on assets  1.5 1.5 1.3 1.3 
 Return on equity 15.9 15.2 12.3 12.5 
                                                
61 The banking sector in  Malaysia consists of conventional commercial banks, Islamic banks and 
investment banks.  
62 Bank Negara Malaysia ; and  information  provided by the authorities.  
63 Bank Negara Malaysia , Financial Stability and Payment Systems Report 2016.  
64 The minimum capital  adequacy ratios applicable to banking institutions in Malaysia are  a common 
equity tier 1 capital ratio of 4.5%, tier 1 capital ratio of 6.0% and total capital ratio of 8.0% (ratios are as a 
percentage of risk -weighted assets).  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   2013  2014  2015  2016  
 Liquid assets to total assetsb 11.6 13.3   
 Liquid assets to short -term liabilitiesb 36.5 42.6   
 Liquidity coverage ratioc   125.1  124.3  
 Net impaired loans ratio  1.3 1.2 1.2 1.2 
Insurance and takaful sector      
 Capital adequacy ratio (conventional only)  246.1  251.9  251.6  248.2  
 Life insurance and family takaful      
  Excess income over outgo (RM billion)  13.2 13.8 12 13.3 
  New business premiums/contributions (RM Billion)  12.1 12.9 13.2 14.2 
  Capital adequacy ratio (conventional only)  260.9  259.2  260.6  245.0  
 General insurance and general takaful      
  Underwriting profit (RM billion)  1.8 1.8 1.3 1.8 
  Operating profit (RM billion)  3.2 3.2 2.7 3.4 
  Gross direct premiums/contributions (RM Billion)  17.8 19.1 19.5 19.7 
  Claims ratio  57.1 57.5 60.2 56 
  Capital adequacy ratio (conventional only)  231.7  279.7  263.3  269.1  
a Beginning January 2013 , capital components are reported based on the Basel III Capital Adequacy 
Framework.  
b Beginning January 2012 , the computation of liquid assets excludes interbank deposits.  
c The Basel III liquidity coverage ratio took effect on 1 June 2015 and superseded  the guidelines on 
liquidity framework and liquidity framework -I issued on 1 July 1998.  
Source:  BNM.  
Regulation  
4.101.   During the period under review, there has been no significant change to the legislation 
governing the banking sector. Banks (both conventional and Islamic) are governed under the 
Financial Services Act (FSA)  2013, the Islamic Financial Services Act (IFSA) 2013, Development 
Financial Institutions Act 2002 (as amended in 2016), and the Central Bank of Malaysia Act of 
2009 (as amended in 2013). Thes e Laws provide a coherent framework for financial sector 
regulation and give the BNM the necessary powers to act effectively in a more complex financial 
landscape. The legislation focuses on:  
 providing greater clarity and transparency in the implementatio n and administration of the 
law;  
 ensuring Sharia compliance and governance in the Islamic financial sector;  
 provisions for differentiated regulatory requirements that reflect the nature of financial 
intermediation activities and their risks to the overal l financial system;  
 provisions to regulate financial holding companies and non -regulated entities;  
 strengthened business conduct and consumer protection requirements; and  
 strengthened provisions for effective and early enforcement and supervisory intervention.  
4.102.   Furthermore, as legislated in the FSA and IFSA, policy on investment in the financial sector 
(encompassing the banking, insurance, and takaful sectors) is based on p rudential and the best 
interest of Malaysia criteria. Under the provisions of these laws, the factors to be considered in 
determining whether an application is in the best interest of Malaysia are:  
a. the effect of the investment on the level and nature of e conomic activity in Malaysia, 
including the effect on productivity, efficiency, and quality of financial services;  
b. the contribution towards enhancing international trade and investment linkages between 
Malaysia and other countries;  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  c. the effect of the inves tment on the stability of the financial system, including on conduct 
and behaviour that could pose a risk to the financial system; and  
d. the degree and significance of participation of Malaysians in the financial sector.65  
4.103.   All banking licences are granted b y the Minister of Finance, based upon recommendations 
made by the BNM. As already mentioned, licences granted to all banks are subject to prudential 
and best interest of Malaysia criteria. All banking institutions must be locally incorporated in 
Malaysia. The requirement also applies to Islamic banks, with the exception of international 
Islamic banks (which may be established either as a locally incorporated company or a branch). 
Locally incorporated foreign -owned commercial banks are allowed to establish u p to eight branches 
and ten microfinance branches.  
4.104.   To further improve the operational efficiency and resilience of the development financial 
institutions (DFIs), amendments to the Development Financial Institutions Act 2002 were made 
and came into effect i n January 2016. According to the authorities, the enhanced legislation will 
ensure that DFIs will continue to provide financing support to strategic sectors , in particular SMEs 
and micro businesses , so that these are able to contribute further to the next phase of Malaysia' s 
socio-economic developments. The amendments aim to further strengthen DFIs ' risk management 
and governance practices. In an effort to ensure comprehensive regulatory framework s are in 
place, the amendments also include  new requirements on Shariah  governance, the necessary 
enforcement framework , in addition to business conduct and consumer protection.  
4.105.   Additionally, the Malaysia Deposit Insurance Corporation Act of 2011 provides a financial 
safety net that includes a  deposit insurance coverage of RM 250,000 per depositor per member 
institution,  and a takaful and insurance benefit protection system. Furthermore, under the 
provisions of the Act, the Minister of Finance has powers to extend protection coverage beyond the 
scope of normal protection for deposits as well as takaful and insurance benefits, for the purpose 
of safeguarding the stability of the financial system.  
Islamic Banking  
4.106.   Malaysia is at the forefront of the global Islamic finance industry and has one of the mo st 
developed Islamic finance sectors. Islamic financial institutions operate in parallel with 
conventional financial institutions, both offering a full range of financial products and services and 
often using the same infrastructure ( Box 4.1). The Islamic finance industry in Malaysia is 
dominated by the Islamic banking sector, which accounts for approximately 47% of industry 
assets, followed by the sukuk market, which a ccounts for around 42%. The balance is accounted 
for by a broad range of financial segments, including Islamic funds, takaful industry, and other 
institutions, such as mortgage companies  and micro -finance institutions. Additionally, there are 
well develope d Islamic money markets and nearly 74% of listed securities on the Malaysia stock 
exchange are Shariah  compliant.66 
Box 4.1 Islamic banking and finance  
Islamic banking entails a financial system that is consistent with Shariah  (Islamic Law). Under Shariah , the 
collection and payment of interest are prohibited, as are trading in financial risk (perceived as a form of 
gambling) and investment in businesses considered haram (forbidden) such as those involving alcohol and 
pork. 
However, Islamic banking does allow gains on capital, and banking activity is guided by four basic principles:  
 risk-sharing: the terms of financial transactions must reflect a symmetric al risk/return distribution that 
each participant to the transaction may face;  
 materiality: a financial transaction must have a "material finality", i.e. it must be directly or indirectly 
linked to a real economic transaction;  
 no exploitation: a financial transaction should not lead to the exploitation of any party to the 
transaction; and  
 no financing of haram activities.  
Islamic financial instruments take the form of contracts between providers and users of funds to manage ri sk. 
In order to ensure compliance with Shariah  law, Islamic banks, Islamic finance companies and banking 
                                                
65 FSA (Schedule 6, Part 1),  and IFSA (Schedule 6, Part 1).  
66 IMF Country Report No. 17/145.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  institutions that offer Islamic financial products and services are required to establish Shariah  advisory 
committees/consultants to advise them and to  ensure that the operations and activities of the bank comply 
with Shariah  principles.  
The main Shariah -compliant financial instruments prevalent today are  those described below : 
 Mudarabah (profit sharing) is a contract with one party providing 100% of the  capital and the other 
party providing its specialized knowledge to invest the capital and manage the investment project. 
Profits generated are shared between the parties according to a pre -agreed ratio. If there is a  loss, the 
first partner ("rabb -ul-mal") will lose his capital, and the other party ("mudarib" ) will lose the time and 
effort invested in the project.  
 Murabaḥah refers to the sale of goods (such as real estate, commodities, or a vehicle) where the 
purchase and selling price, other costs, and th e profit margin are clearly stated at the time of the sale 
agreement. Murabahah has become "the most prevalent" Islamic financing mechanism. Murabahah 
works as finance when the lender/buyer pays the bank/seller for the good over a period of time, 
compensat ing the bank/seller for the time value of its money in the form of "profit" not interest. With a 
fixed rate of profit determined by the profit margin for the purchase of a real asset, this is a fixed -
income loan. The bank is not compensated for the time va lue of money outside of the contracted term 
(i.e. the bank cannot charge additional profit on late payments); however, the asset remains as a 
mortgage with the bank until the default is settled.  
 Istisna (manufacturing finance) is a process where payments a re made in stages to facilitate the work 
of manufacturing/processing/construction. An instalment of Istisna, for example, may enable a 
construction company to finance construction of sections of a building or help manufacturers pay for an 
order of raw mate rials.  
 Ijarah means lease, rent or wage. Generally, the ijarah concept refers to selling the benefit of use or 
service for a fixed price or wage. Under this concept, the bank makes available to the customer the use 
or service of assets/equipment such as p lant, office automation, motor vehicles for a fixed period  and 
price.  
 Musharakah (joint venture) is a relationship between two or more parties that contribute capital to a 
business and divide the net profit and loss pro rata. This is often used in investm ent projects, letters of 
credit, and the purchase or real estate or property. In the case of real estate or property, the bank 
assesses an imputed rent and will share it as agreed in advance. All providers of capital are entitled to 
participate in manageme nt, but not necessarily required to do so. The profit is distributed among the 
partners in pre -agreed ratios, while the loss is borne by each partner strictly in proportion to respective 
capital contributions. This concept is distinct from fixed -income inv esting (i.e. issuance of loans).  
 Wakalah is as agency contract where the customer (principal) appoints the bank as an agent (Wakil) to 
carry out business on their behalf.  
 Sukuk (Islamic bonds) – a major difference between conventional bonds and sukuk is th at the structure 
of sukuk removes interest -based elements which are replaced by an asset -based income structure using 
most typically ijarah or wakalah contracts. Total outstanding sukuk as of the end of 2016 was US$325 
billion.  
As of 2016, Islamic banking assets were in excess of US$1.5 trillion, which is more than 1% of global banking 
assets. Furthermore, Islamic banking has been growing much faster than conventional banking, although from 
a much lower base. Between 2009 and 2013, Islamic banking assets gr ew at an average annual rate of 18% 
and were expected to grow at an average annual rate of 20% between 2014 and 2020.  
Source:  BNM, Islamic Financial Services Board, and WTO Secretariat.  
4.107.   Since the establishment of the first Islamic bank in 1983, the Islamic banking sector has 
grown considerably. Malaysia now has 16 full -fledged Islamic banks, of which six are foreign 
owned. In addition, 12 commercial banks offer Islamic financial products through windows. 
Although conventional banks continue to domina te the banking sector, the Islamic banking sector 
has grown considerably more rapidly. Consequently, the market share of Islamic Banks has more 
than doubled in the last decade from around 12% in 2007 to 28% by end -2016 ( Table 4.28).  
Table 4.28 Islamic banking system, 2013 -16 
 2013  2014  2015  2016  
 RM million (or otherwise stated)  
Total assetsa,b 558,295  615,190  684,906.2  741,964.8  
% of total assets of entire banking systema,b 25 25.5 26.8 28 
Total financinga,b 370,673.8  427,887.8  495,005.9  549,503.9  
% of total loans/financing of entire banking systema,b 27.5 29.2 31.3 33 
Total deposits and investment accountsa,c   550,275.1  602,204.1  
Total deposits  436,327.6  494,738.3  503,127.8  528,527.1  
Total investment accounts    47,147.3  73,677.1  
% of total deposits and investment accounts of entire banking 
systema,c 26.7 28.2 30 31.8 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   2013  2014  2015  2016  
 % 
Total capital ratiod 15.1 16.2 16.1 16.6 
Tier 1 capital ratiod 12.8 12.9 12.3 13 
Common equity tier 1 capital ratiod 12.8 12.8 12.3 13 
Return on assets  1.2 1.1 1 1 
Net impaired financing ratio  1 0.9 0.9 1 
a Including DFIs under the DFI Act of 2002.  
b Beginning 1 July 2015, includes assets/financing funded by investment accounts which are 
recognized on and off -balance sheet.  
c Beginning 1 July 2015,  Islamic deposits and investment accounts are required to be designated 
separately. Investment account fi gures include those which are recognized on and off -balance sheet.  
d Beginning January 2013 , capital components are reported based on Basel III Capital Adequacy 
Framework.  
Source:  BNM.  
4.108.   The development of a comprehensive Islamic finance ecosystem in Mala ysia was guided by 
two roadmaps. The first, the Financial Sector Masterplan (2001 -2010), focused on three areas: 
enhancing institutional capacity to achieve significant competitive edge; promoting healthy 
competition among the Islamic banking and takaful p layers; and strengthening the regulatory 
framework for Islamic finance to ensure effective functioning in parallel with conventional banking 
and insurance.  
4.109.   Under the second roadmap, the Financial Sector Blueprint (2011 -2020), Malaysia aims to 
position itse lf as the premier global Islamic finance marketplace. This is a continuation of the 
Malaysia International Islamic Financial Centre (MIFC) initiative launched in 2006 to promote 
Malaysia as a platform for cross -border Islamic financial activities, particul arly for international 
business. Malaysia has also taken the lead in strengthening the Islamic finance landscape, being 
one of the founding members of the Islamic Financial Services Board (IFSB) that develops 
international prudential standards and regulato ry framework s for Islamic finance, as well as the 
International Islamic Liquidity Management Corporation (IILM) that facilitates efficient liquidity 
management in the international Islamic financial system. In addition, in 2008  Malaysia further 
strengthene d ISRA , which  is a premier International research agency on Islamic Finance and 
Shariah  that promotes greater harmoni zation and mutual recognition of Shariah . 
4.110.   Islamic banks are well capitalized with good asset quality. At the end of 2015, the sector 's 
total capital ratio was 16.6% and tier 1 capital ratio was 13.0%, which compares to 13.8% and 
12.8% respectively for conventional banks. Furthermore, the net impaired financing ratio for 
Islamic banks was 1% at the end of 2016 compared to 1.2% for conventional  banks.  
4.111.   On the other hand, return on assets within Islamic banks  (1%) is lower than at 
conventional banks (1.3% ).67 The comparatively lower profitability is partly explained by a higher 
growth rate and the higher yield expected by customers who are attracted to Islamic products 
because of the profit -sharing value proposition. Lower profitability could also be attribute d to the 
higher overhead cost -to-revenue ratios due to start -up costs of foreign full -fledged IBs. The cost 
structure of some standalone IBs is slightly higher relative to IBs within groups, as the latter reap 
the benefits of shared platforms.  
Regulation  
4.112.   The Financial Services Act 2013 (FSA) and Islamic Financial Services Act 2013 (IFSA) 
combined six pre -existing statutes, to provide a more cohesive and integrated legal framework 
that delivers a consistent and comprehensive treatment of similar risks, thus minimizing the 
prospect for regulatory arbitrage and gaps. As such, the regulatory framework for Islamic banks 
leverages on the framework for conventional banks. Regulations governing corporate governance, 
risk management, prudential limits for related par ty transactions, non -performing financing 
classification and provisioning and liquidity management are similar for both conventional and 
Islamic banks. Regulations specific to Islamic banking include:  
                                                
67 Bank Negara Malaysia,  The Financial Stability and Payment Systems Report 2016.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   Islamic banks are required to comply with a tailored Capital Adequacy Framework 
(capital component and RWAs) which is in line with the Basel Committee on Banking 
Supervision (BCBS) and the IFSB. Furthermore, investment accounts are prohibited from 
any form of principal and profit guarantees by the Islamic ba nks; 
 Islamic banks are allowed to undertake investment or acquisition of completed 
properties or land for the purpose of Islamic bank business activities, which includes for 
the purpose of onward sale or lease. However, in the case of conventional banks, t he 
acquisition of immovable properties is allowed primarily for the purpose of providing 
housing or other amenities for the staff, satisfaction of debts (i.e . foreclosed properties) 
or premises for conducting business operations; and  
 Islamic finance instit utions, Islamic banks and takaful operators are required to observe 
Shariah  principles. In this regard, they are required to comply with additional 
requirements including a Shariah  Governance Framework, while ensuring that their 
businesses are carried out in compliance with Shariah  Standards for the respective 
contracts.  
4.113.   Furthermore, under the provisions of IFSA, Islamic banks are required to provide 
customers with information on alternative IFSA -compliant deposit products that they can continue 
to maintain  their funds in, or an option to participate in investment accounts.68 The migration of 
accounts was completed within the mandated two -year period (2015). The exercise entailed the 
segregation of investment accounts (structured on Shariah contracts of Musha rakah , Mudarabah 
and Wakalah ) from deposit accounts, with the former being prohibited from any form of principal 
and profit guarantees by the banks. To complement the operationalization of investment accounts, 
the Investment Account Platform (IAP) was laun ched by the industry in February 2016. The IAP 
serves as an online marketplace that matches investors with viable ventures that suit their risk 
appetites.  
4.114.   The National Shariah  Advisory Council on Islamic Banking and Takaful (NSAC) was 
established in 1997 b y the BNM and it is the highest Shariah authority on Islamic banks. All 
licensed Islamic financial institutions are required to have an in -house Shariah committee, 
appointments to which are subject to regulatory approval. Although the decisions of the Shariah 
Advisory Council are binding on IFIs, the financial regulator does not get involved in dictating what 
operational Shariah preferences must be adopted by the market. Under the provisions of IFSA, it is 
an offence for Islamic financial institutions to ca rry on Shariah non-compliant activities ; breaches 
are subject to penalties.69 Under IFSA, the BNM has wide powers to assess, intervene, direct and 
penalize IFIs in relation to offences and breach es of IFSA provisions. In line with these 
developments relatin g to prudential regulation of IFIs, a Risk Based Supervisory (RBS) Framework  
has been applied to all FIs (including IFIs) to ensure consistent supervisory risk assessment. 
Adoption of the RBS framework has provided a more comprehensive and holistic assessm ent, 
capturing emerging risks of significant business activities of IFIs as well as assessment s of quality 
of risk management of the financial institutions. These include the assessment of Shariah  review, 
Shariah  audit and Shariah  risk management functions  in the IFIs. Under RBS regime, integration 
of macro surveillance, regulation and supervision functions have also provided supervisors with 
updated developments of emerging risks within the Islamic banking system for effective 
supervision of IFIs. Supervis ors leverage the technical capabilities of specialised risk experts, in 
particular experts on  Shariah  risk for IFIs , on any complex risk assessments. Supervisors are also 
guided by internal supervisory manuals and guidance to help them assess  the IFIs in accordance 
with the RBS framework.  
                                                
68 Investment accounts are risk -absorbing and hence the IBs are not required to hold regulatory capital 
against  assets funded by them.  
69 For any Islamic FI undertaking Shariah non-compliant activities, breaches are subject to penalties as 
per the IFSA Section 28 "Duty of institution to ensure compliance with Shariah ", which states that: Any person 
who contravenes s ubsection (1) or (3) commits an offence and shall, on conviction, be liable to imprisonment 
for a term of not exceeding eight years or to a fine not exceeding twenty -five million ringgit or to both.  
 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Future direction  
4.115.   The future direction of the financial sector is guided by the Financial Sector Blueprint 
2011-20. Under the plan,  the financial sector is envisaged as a key driver of economic growth, 
with it s growth being anchored in that of the real economy. The plan foresees a more competitive, 
dynamic, inclusive, and integrated financial system, offering a more diverse range of products and 
services to cater for the requirements of businesses operating in more integrated regional and 
global markets as well as to meet the needs of a more knowledge - and innovation -intensive 
domestic economy,  and the more advanced and differentiated needs of Malaysian households.  
4.116.   The Blueprint identifies nine focus areas:  
 effective intermediation for a high -value -added and high -income economy;  
 developing deep and dynamic financial markets;  
 financial inclusion for greater shared prosperity;  
 strengthening regional and international financial integration;  
 internationalizatio n of Islamic finance;  
 a regulatory and supervisory regime to safeguard the stability of the financial system;  
 electronic payments for greater economic efficiency;  
 empowering consumers; and  
 talent development to support a more dynamic financial sector.  
4.117.   The Blueprint sets out 69 recommendations and over 200 initiatives to be implemented 
progressively by 2020. According to the BNM, significant progress has been made in accomplishing 
these. As of end -2016, 41% of the identified initiatives had been fully im plemented, while another 
44% were progressing as planned. Collectively, these initiatives covered most of the high -impact 
initiatives across all nine key objectives of the Blueprint. In particular, measures to safeguard the 
stability of the financial syste m and strengthen key enablers for financial development have helped 
cultivate the necessary environment for greater innovation and growth of the financial sector.70 
Insurance  
4.118.   In 2016, the sector consisted of 10 life insurers, 19 general insurers, 4 composit e insurers, 
3 family takaful operators, 7 composite takaful operators, a life reinsurer, 5 general reinsurers, a 
composite reinsurer and 5 takaful reinsurance operators. In addition, there are 56 approved 
insurance and takaful brokers and financial advisor s, as well as 45 loss adjusters that are 
registered under the FSA.  
4.119.   The insurance and takaful (Islamic insurance) segment showed robust growth during the 
review period, with premiums rising from RM  53 billion in 2013 to over RM  61 billion in 2016, while 
assets increased from RM  234 billion to RM  277 billion over the same period. The sector is 
dominated by the life insurance sector which accounted for over 85% of premiums and 90% of 
assets in 2016. Furthermore, within the life insurance and family takaful sec tor, the growth of 
takaful contributions has been notable, accounting for nearly 27.8% of new premiums and 
contributions. As a result, takaful contributions now represent 13.3% of total industry premiums 
and contributions (Table 4.29). 
Table 4.29 Takaful sector, 2013 -16 
 2013  2014  2015  2016  
 RM million (or otherwise stated)  
Takaful fund assets  20,934.2  22,746.3  24,711  26,870.8  
Family  17,952.2  19,619.3  21,389.1  23,278.8  
General  2,982  3,127  3,321.9  3,592  
% of insurance and takaful industry  9.2 9.4 9.7 10 
Net contributions income  6,207.9  6,330.6  6,815.6  7,532.7  
Family  4,807.4  4,787.2  5,104.3  5,742  
                                                
70 Bank Negara Malaysia,  The Financial Stability and Paym ent Systems Report 2016.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   2013  2014  2015  2016  
General  1,400.5  1,543.4  1,711.3  1,790.7  
% of insurance and takaful industry  14.1 13.4 13.8 14.6 
Family takaful      
New business contributions  3,563.5  3,500.3  3,638.4  3,951.1  
General takaful      
Gross direct contributions  1,908.8  2,163.7  2,295.9  2,401.7  
Claims ratio (%) 53.6 47.8 51.9 49 
Source:  BNM.  
4.120.    Growth has also been supported by strong overall capitalization. The industry's aggregate 
capital adequacy ratio (CAR) stood at 243.9% as at end -2016, with surplus capital above the 
regulatory minimum of 130% increasing to RM 37.9 billion in 2016 (Table 4 .29). Profitability 
improved for the year. In the life insurance and family takaful sector, excess income over 
outgoings increased by over 10% to reach RM 13.3 billion in 2016. This was mainly driven by 
higher growth in premium and contribution income.  
4.121.   Drivers of growth are different for the life insurance and family takaful sectors. In the life 
insurance sector, new business growth has been mainly supported by higher growth in regular 
premium endowment policies  that combine protection with savings and investments. In contrast, 
new business in the family takaful sector remains largely driven by group term policies, including 
credit -related term policies, which provide relatively higher protection benefits but do not include 
any savings or investment components. The share of medical and health insurance/takaful 
business has increased, mainly reflecting higher group employee benefits.  
4.122.   The insurance penetration rate, measured by the ratio of the total number of life insurance 
and family takaful policies in force to the total population, has remained fairly static within the 
range of 54% to 56% over the review period, compared to the 75% target set under the Economic 
Transformation Programme.  
Regulation  
4.123.   Insurance compa nies (insurers) and takaful operators are governed by the FSA and IFSA. 
Under these laws, composite insurers and takaful operators that carry out both life and general 
businesses or family and general businesses are required to operate under separate entit ies or 
single licences with effect from 1 July 2018. This requirement aims to allow greater focus on the 
core areas of the business of insurers and takaful operators. Towards this end, one (out of 12 
composite insurers and takaful operators) has successful ly converted its existing composite licence 
into a single licence, while four have obtained approval in principle on their applications. All takaful 
operators need to continue to ensure their aims and operations are in compliance with Shariah  at 
all times,  and when there is a conflict of interest between shareholders and takaful participants, 
the Board of directors of takaful operators must give priority to the latter.  
4.124.   To operate in Malaysia, an insurance company must obtain a licence from the Ministry of 
Finance, which is granted upon recommendation from the BNM. The issuance of new licences in 
the insurance and takaful industry, like in the banking sector, is guided by prudential criteria and 
the best interest of Malaysia criteria (as per the FSA and IFSA ). All foreign insurance companies 
must be incorporated in Malaysia. However , flexibility is accorded to foreign professional 
reinsurers, retakaful operators, and international takaful operators to operate through a branch 
office in Malaysia. There have be en no insurance licences issued during the review period. 
Currently, 20 of 32 direct insurers are foreign -owned, 5 of 7 reinsurers are foreign -owned (of 
which 4 out of 5 are set up as branches, and 1 is locally  incorporated).  
4.125.   With a view to supporting grow th and profitability in the motor and fire insurance 
segments, BNM has implemented its phased tariff liberalization plan, which will move the industry 
towards risk -based pricing.  Under Phase I, which commenced on July 1 2016, new motor and fire 
insurance p roducts may be offered at market -based prices while existing motor and fire insurance 
products under the old tariff plan continue to be available to the public at prevailing rates. Under 
Phase II, which commenced on 1 July 2017, tariffs will be removed for  all existing motor products , 
except for motor third party products for which  tariff rates will be gradually adjusted. Further 
liberalization of the tariff for motor third party products will be reviewed in 2019, taking into 
account market developments obs erved under Phases I and II.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Capital markets  
4.126.   Malaysia has one of the most developed and active capital markets in the region. The 
market encompasses equities, debt instruments and derivatives. At the end of 2016, the size of 
the market was approximately RM  2.9 trillion. Bursa Malaysia had a market capitalization of nearly 
RM 1.7 trillion, while outstanding debt issuances accounted for RM 1.2 trillion. During the period 
under review , the Kuala Lumpur Composite Index (KLCI) decreased from 1,866.96 at the end of 
2013 to 1,773.16 in August 2017 ( Chart 4.5).  
Chart 4.5 KLCI and market capitalization, 2013 -17 
 
Source:  Information  provided by the authorities based on Bloomberg SC Icube.   
4.127.   The market is dominated by Shariah  compliant equities and instruments. As a whole , the 
Islamic capital market accounts for approximately 60% of the total capital market in terms of 
market capitaliz ation and outstanding debt issues. Furthermore, nearly 74% of the listed securities 
are Shariah  compliant. Malaysia accounted for nearly 50% of the world 's sukuk (Islamic bonds) 
issuances as well as 52.6% of outstanding sukuk globally and the country has b ecome a global 
multi-currency sukuk  hub. By end -2015, 32 foreign currency sukuks by both domestic and foreign 
issuers, arranged by Malaysian banks, worth USD 21.3 billion had been issued in USD, SGD, JPY 
and CNY. Innovative sukuk structures have also been introduced, such as the sustainable and 
responsible investment sukuk that helps finance green technology and other ethical investments.71  
4.128.   In addition to sukuk  and equities, Malaysia also has a well -developed fund management 
industry comprising 74 licensed fund management companies with assets under management 
(AUM) totalling RM  696.3 billion as at the end of 2016. The industry registered a CAGR of 12% 
over a seven -year period from 2009 to 2016. Furthermore, Malaysia is the only country in the 
world with a l icensing framework dedicated to Islamic fund management companies. As at the end 
of 2016, 20 out of the 74 fund management companies in Malaysia are full -fledged Islamic fund 
managers operating under the framework while 31 other fund managers operate Islam ic windows 
with a combined Islamic AUM of RM  149.6 billion, compared to RM  37.6 billion in 2009, reflecting a 
CAGR of 21.8%. Additionally, continuous efforts have been undertaken to ensure the Islamic 
capital market serves the needs of both investors and i ssuers. Recent initiatives include the launch 
of the Islamic Fund and Wealth Management Blueprint in 2017, as well as the introduction of the 
first-ever Sustainable and Responsible Investment (SRI) Sukuk Framework in August 2014 which 
intends to facilitate  sustainable and responsible investing.   
Regulation  
4.129.   Capital markets continue to be governed by the Securities Commission Malaysia Act of 
1993 (SCA 1993), the Capital Markets and Services Act of 2007; the Securities Industry 
(Depository) Act of 1991; and th e subsequent amendments to each piece of legislation. The 
                                                
71 OECD , Malaysia's Economic Success Story and Challenges , January 2017 . 
02004006008001,0001,2001,4001,6001,8002,000
1,5001,5501,6001,6501,7001,7501,8001,8501,900
2013 2014 2015 2016 Aug-17Market Capitalization (RM billion)
Outstanding debt issuances (RM billion)
KLCI (points)Chart 4. KLCI and market capitalization, 2013 -17
Source:  Points RM billionWT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Securities Commission of Malaysia (SCM), which was established under the SCA 1993, is the 
regulator of the securities and derivatives markets. Under the provisions of the laws, the SCM is 
mandated , inter alia :  
 to advise the Finance Minister on all matters relating to the capital market;  
 to regulate all matters relating to the capital market, including supervising and monitoring 
the activities of Bursa Malaysia and the exchanges it operates, licensi ng or registering and 
supervising all persons engaged in regulated activities approving the issuance of capital 
market products72, regulating  takeovers and mergers, and managing systemic risk;   
 to register or recogni ze all auditors of public interest entiti es and schedule funds;  
 to set, implement, and monitor standards and qualifications for both securities and 
derivatives markets; and  
 as a member of the International Organization of Securities Commissions, the SCM also 
ensures that international standards  and best practices are maintained.  
4.130.   Recent regulatory changes include: the establishment of the regulatory framework for the 
introduction of alternative trading platforms such as equity crowdfunding platforms and peer -to-
peer financing platforms; and incre asing the regulatory powers of the SCM with respect to audit 
and examination. In 2015 , the SCM also launched the "Lodge and Launch" framework for unlisted 
capital market products that are to be offered or marketed to sophisticated investors (i.e. the 
whole sale market).  
4.131.   The future direction and growth of capital markets in Malaysia is articulated in the Capital 
Markets Masterplan 2 (CMP2), which was released in 2011. Themed Growth with Governance , 
CMP2 tackles the challenges for Malaysia' s capital market in expanding its role in invigorating 
national economic growth while addressing concerns about the efficacy of markets in the 
aftermath of the global financial crisis. It focuses on utilizing domestic savings for capital formation 
so as to foster entrepreneur ship and innovation.  
4.132.   The main strategies under the plan are: promoting capital formation for economic growth ; 
increasing the efficiency of savings intermediation; deepening secondary market liquidity; 
facilitating the internationalization of key segments; and building  capacity and strengthen ing 
information infrastructure to support transition to an electronic env ironment. In this regard, the 
expansion of capital market intermediaries will be facilitated to enable the offering of a wide range 
of domestic and international products and services to a broader group of investors. The SCM will 
also facilitate and work w ith intermediaries to help them evolve their business models through 
allowing decoupling and further outsourcing, for specialized activities.   
4.133.   Under the plan, foreign equity restrictions in unit trust management companies were lifted 
in 2014; boutique fund  management licences were introduced in 2015; and licensing requirements 
were relaxed to enable establishment of niche fund managers. As of January 2017, full foreign 
ownership in credit rating agencies was permitted. Mandatory credit ratings were also rem oved to 
enable corporations to issue bonds without a rating and at a lower cost, broadening and 
diversifying the corporate bond market, and allowing investors to select from a wider set of risk 
profiles. In addition, the SCM embarked on efforts to facilita te wider access  to market -based 
financing avenues and the leveraging of technology to enable greater investor participation. This 
led to the introduction of an equity -based crowdfunding (ECF) framework in February 2015, 
peer-to-peer financing (P2P) framewo rk in April 2016 , and digital investment management (DIM) 
framework in May 2017.  
4.134.   Malaysia is recognized as one of the largest sukuk issuers in the world. According to the 
authorities, the close alignment between socially responsible investment principles a nd the 
principles of Islamic finance led to the launch of the Sustainable and Responsible Investment 
                                                
72 Capital market product is defined in Section 2 of the Capital Markets and Services Act 2007 as 
securities; derivatives; a private retirement scheme; a unit t rust scheme; any product or arrangement which is 
based on securities or derivatives or any combination thereof; and any product which the Minister may 
prescribe as a capital market product.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Sukuk Framework in 2014, leveraging on the existing strength in the sukuk market to provide 
opportunities for greater alignment between these two segments.  To further strengthen the global 
positioning of Malaysia 's Islamic Capital Market, the SCM also launched a five -year Islamic Fund 
and Wealth Management Blueprint in January 2017.  
4.135.   The SCM also introduced a series of measures to further improve existing mar ket 
segments. In the equity market, efforts were focused on driving greater investments in small and 
mid-cap companies. In the bond market, work was centred on driving greater retail participation 
and improving secondary trading. A greater variety of ETF a nd derivatives products were also 
introduced.  
4.3.3   Telecommunications  
4.136.   In 2015, the gross value of output for telecommunication services was RM 72.3 billion and 
51,510 people were engaged in the sect or, an increase  since 2010 when gross output was 
RM 53.4 billion and 41,814 people were engaged. The main centre of activity in terms of value, 
employment, and investment is Kuala Lumpur. Non -Malaysian residents account for 2% of gross 
output and fixed assets, and 4.6% of persons engaged.73 
4.137.   The fixed line and broadban d service markets are dominated by Telekom Malaysia which is 
majority state -owned and has about 95% market share. TIME dotCom Bhd (wholly owned by the 
Government) provides wholesale bandwidth and operates the Cross Peninsular Cable System. 
There are four m ajor mobile service providers Maxis, Digi, Celcom and U Mobile ( Table 4.30). In 
terms of total subscribers, Digi is the market leader but in terms of service revenue,  Maxis has 
more market share.  
Table 4.30 Mobile service providers, 2016  
 Maxis  Digi Celcom  U Mobile  
Total subscribers (million)a 11.96  12.30  10.55  .. 
 Prepaid  8.96 10.20  7.60 .. 
 Postpaid  2.97 2.10 2.96 .. 
Service revenue 
(RM billion)a 8.46 6.23 6.03 .. 
 Prepaid  4.02 4.27 2.73 .. 
 Postpaid  3.93 1.96 2.77 .. 
Capital expenditure 
(RM billion)a 1.19 0.78 1.30 .. 
Ownershipb 64.91% owned 
by BGSM Equity 
Holdings Sdn 
Bhd 49% owned 
by Telenor 
Asia Pte Ltd  Part of the Axiata Group 
which is 36.61% owned 
by Khazanah Nasional 
Berhad, the Malaysian 
sovereign wealth fund  Main 
shareholders 
are ST 
Telemedia, and 
U Telemdia  
.. Not available.  
a Eu, GT (2017), Telco battleground 2016 , Digital News Asia, 1 March. Viewed at: 
https://www.digitalnewsasia.com/mobility/telco -battleground -2016-good-year-maxis -and-digi-not-
so-celcom?page=0%2C0  [October 2017].  
b Axiata (2017), Annual Report 2016 , p. 258; Maxis (2017), Annual Report 2016, p. 205; Digi (2017), 
Inspiring Your Digital Life, Annual Report 2016 , p. 25; and U Mobile online information . Viewed at: 
http://www.u.com.my/about -us/our -company/about -umobile  [October 2017].  
Source:  Department of Statistics, Malaysia.  
4.138.   The number of fixed line subscribers appears to have stabili zed, although the downward 
trend in the number of fixed line subscriptions per 100 inhabitants has continued.  It also appears 
that the number of mobile phone subscriptions has started to decline from a peak in 2014 both in 
total number and as a proportion of the population (Table 4.31). 
                                                
73 Department of Statistics, Malaysia (2017), Economic Census 2016 – Information and Communication 
Services , July. Viewed at: https://www.dosm.gov.my/v1/  [October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 4.31 Selected telecommunication indicators, 2012 -16 
 2012  2013  2014  2015  2016  
Fixed telephone subscriptions (million)  4.59 4.54 4.41 4.49 4.51 
Fixed telephone subscriptions per 100 
inhabitants  15.69  15.26  14.61  14.65  14.50  
Mobile cellular subscriptions (million)  41.23  43.00  44.93  44.10  43.91  
Mobile subscriptions per 100 inhabitants  141.33  144.72  148.83  143.89  141.17  
Percentage using the internet (%)  65.8 57.1 63.7 71.1 78.8 
Fixed broadband subscriptions (million)  2.92 2.94 3.06 3.06 2.72 
Source:  ITU statistics. Viewed at: http://www.itu.int/en/ITU -D/Statistics/Pages/stat/default.aspx  
[October  2017].  
4.139.   The principle legislation on telecommunications remains the Communications and 
Multimedia Act (CMA) No. 588 of 1998 and the Communications and Multimedia Commission Act 
No. 589 of 1998. The Ministry of Communications and Multimedia (MCMM) is responsible for 
developing policies for the telecommunications industry. The regulator is the Malaysian 
Communicat ions and Multimedia Commission (MCMC) which is answerable to the Minister of 
Communications and Multimedia. The MCMC is also responsible for advising the Minister on policies 
relating to telecommunications, and for recommendations on granting and cancellin g licences. In 
addition to mobile, fixed, and broadband services, the MCMC is the regulator for postal and courier 
services, and digital signatures under the Services Act No. 741 of 2012 and the Digital Signature 
Act No. 562 of 1997.  
4.140.   The Eleventh Malaysia Plan emphases the importance of digital infrastructure generally and 
the need to keep pace with technological developments while improving affordability and consumer 
protection and extending broadband to 95% of populated areas. The infrastructure projects to 
support these objectives include High -speed Broadband 2, Suburban Broadband, and Digital 
Terrestrial Television.  
4.141.   The four strategies in 11MP specifically directed at the digital infrastructure include:  
 expanding and upgrading broadband infrastructure i ncluding through the legal 
requirement that communications installations be treated as essential services in all new 
housing and commercial developments, improv ing the capacity of connections, and 
improv ing inter-agency coordination for infrastructure plan ning; 
 increasing affordability and protection through improvements to the Access Pricing 
Framework for broadband, and setting standards and guidelines for better consumer 
protection;  
 migrating to Digital Terrestrial Television through the second phase of t he DTT service, 
and introduction of new DTT services; and  
 strengthening digital infrastructure and applications in urban areas to improve other 
services such as transport, utilities and waste management, and to improve energy 
efficiency.74 
4.142.   The licence categ ories for telecommunications services are set out in Table 4.32. Either 
individual or class licences are required for telecommunications activities. There are no forei gn 
equity restrictions on class licences while applications for individual licences are assessed on a 
case-by-case basis. Under the Communications and Multimedia Act, the Minister may decide to 
grant a licence based on the MCMC's recommendations. In evalua ting an application for no foreign 
equity restriction for a network facility or network service provider licence , the factors the MCMC 
would tak e into account would usually include:  
 investments made in Malaysia by the applicant and its impact on investment  and the 
economy;  
 employment of local Malaysians (number of Malaysians employed and significant/key 
positions held) and job opportunities created;  
                                                
74 Prime Minister's Department (2015), Eleventh Malaysia Plan 2016 -2020 – Anchoring Growth on 
People, pp 7.2 -7.31. WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   transfer of technology and skills;  
 unique or exclusive nature of business; and  
 contribution to the socio-economic development of Malaysia.  
4.143.   In general , a network facility or network service provider licensee is allowed to hold up to 
49% foreign equity and must have 30% bumiputera  equity. However, equity restrictions do not 
apply if the licence holder is a public listed company , although they do apply when the licensee is a 
private limited company (Sendirian Berhad) held by a public limited company (Berhad).  
Table 4.32 Telecommunications licensing regime, 2017  
Licensing category  Individual licence  Class licence  
Network Facilities Provider (NFP)  
For owners/providers of network 
facilities infrastructure  Earth stations; fixed links and cables; 
radio communications transmitters 
and links; satellite hubs; satellite  
control stations; space stations; 
submarine cable landing centres; and 
towers, poles ducts, and pits used in 
conjunction with other network 
facilities  Niche or limited purpose network 
facilities  
Network Service Provider (NSP)  
Providers of the basic connectivity 
and bandwidth, enabling connectivity 
between different networks  Bandwidth services; broadcasting 
distribution services; cellular mobile 
services; access applications 
services; space services; switching 
services; and gat eway services  Niche customer access; niche 
connection services  
Application Service Provider 
(ASP)  
Provision of services to end -users, 
such as voice services, data services, 
and internet access  n.a. PSTN telephony; public cellular 
services; IP telephony; public 
payphone services; public switched 
data services; audiotext hosting 
services provided on an opt -in basis; 
directory services; internet access 
services; and messaging services  
Content Application Service 
Provider (CASP)  
Subset of ASP such as television and 
radio broadcast services, and 
services such as the provisioning of 
information services  Satellite broadcasting; subscription 
broadcasting; terrestrial free to air 
TV; terrestrial radio broadcasting; or 
such other content applications 
services which are not exempt under 
the CMA or not subject to a class 
licence under Part IV of the Licensing 
Regulations  Content applications service limited 
in its availability to:  
i. vehicles, vessels, railway or aircraft 
used for hire or reward or for a ny 
other valuable consideration;  
ii. a single commercial or residential 
building; or  
iii. a restricted geographical area  
 
Content applications service of 
limited appeal or which is targeted to 
a special interest group and available 
through subscription by  persons 
using equipment specifically designed 
for receiving the said service; content 
applications service where the 
content is remotely generated and 
distributed through a network service 
and displayed on a screen; content 
applications service for distan ce 
learning purpose; or content 
applications service linked or 
associated specifically to a sporting, 
cultural or other one -off event  
n.a. Not applicable.  
Source:  MCMC (2017), Licensing Guidebook , 31 August. Viewed at: 
https://www.mcmc.gov.my/skmmgovmy/media/General/pdf/SKMM_Guidelines_V2_2017.pdf  
[October  2017].  
4.144.   Individual licences are granted to applicants to provide a specific type of service and 
applications are subject to detailed examination by the MCMC pursuant to  Regulation 7 of the 
Licensing Regulations of 2000. An applicant for an individual licence must make an application to 
the MCMC, provide supporting documentation and pay an application fee of RM 10,000 per 
individual licence. The MCMC then has 60 days to e valuate the application and make a 
recommendation to the Minister who has 30 days to approve it. No approval means the application WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  has been rejected. On receipt of an approval, the applicant must pay a fee of RM 50,000 per 
individual licence before the lic ence becomes valid.  
4.145.   Class licences, on the other hand, are granted through a process of registration with the 
MCMC and are subject to a lower degree of regulation. Applications from eligible applicants for 
class licences must be made to the MCMC, with supp orting documentation and a fee of RM 2,500. 
The MCMC checks, processes and registers the application.  
4.146.   Over the period 2012 to 2016, there has been a steady increase in the number of 
Individual licences issued while the number of class licences has decrease d (Table 4.33). 
Table 4.33 Telecommunications licences issued , 2012 -16 
Individual licences  
 NFP NSP CASP  Total  
2012 123 119 38 280 
2013 134 131 39 304 
2014 150 143 38 331 
2015 156 144 38 338 
2016 176 156 48 380 
Class licences  
 NFP NSP CASP  ASP Total  
2012 22 24 26 941 1,013  
2013 20 22 27 541 610 
2014 20 21 27 505 573 
2015 16 16 22 492 546 
2016 15 15 12 456 498 
Source:  Malaysian authorities.  
4.147.   Appeals to MCMC decisions may be made to an appeals tribunal, which is established on an 
ad hoc  basis by the Minister. At 31 August 2017, there had been no appeals and no appeals 
tribunal had been established  
4.148.   Under the CMA, all network service and facilities service providers have access to services 
and facilities on the Access List75 on reasonable terms and conditions and on an equitable and 
non-discriminatory basis. Service providers seeking access are required to make a written request 
to the access provider. The MCMC has prepared a Mandatory Standard on Access which sets out 
the non -pricing terms and conditions. This Standard was reviewed in 2016. The Mandatory 
Standard on Access Pricing was reviewed in 2012 and a new determination was issued by the 
MCMC with effect from 1 January 2013.76  
4.149.   Universal service is a principal objective of telecommunications policy, the CMAT, and the 
USP Regulations of 2002, and is one of the factors behind several infrastructure initiatives.  The 
priorities are to provide access in underserved areas or localities for both telephony and internet 
services through infrastructure funded by the Universal Service Provider Fund (USP Fund). Licence 
holders with total net revenue of more than RM 2 mill ion from the designated services listed in the 
regulations are required to contribute 6% of their weighted net revenue from these services to the 
USP Fund.  
                                                
75 MCMC (2005), Commission Determination on Access List, Determination No. 1 of 2005, and  
MCMC (2009), Variation to Commission Determination on Access List (Determination No. 1 of 2005), 
Determination No. 1 of 2009. Viewed at: https://www.mcmc.gov.my/resources/reports/access -list 
[October  2017].  
76 MCMC (2013), Commission Determination on the Mandatory Standard on Access Pricing – 
Determination No. 1 of 2012 . Viewed at: 
https://www.mcmc.gov.my/skmmgovmy/media/General/pdf/Commission -Determination -on-MSAP -2012.pdf  
[October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.3.4   Transport  
4.3.4.1   Air transport  
4.150.   The Department of Civil Aviation (DCA) in the Ministry of Transport (MOT) is  responsible 
for policy relating to air services and representing Malaysia in international organizations and 
negotiations.  
4.151.   The principal changes to legislation on air transport during the review period were the 
enactment of the Malaysian Aviation Commiss ion Act No. 771 of 2015, and the introduction of the 
Civil Aviation Regulations in 2016. The Act provides the legal basis for the establishment of the 
Malaysian Aviation Commission (MAVCOM) which took over some of the responsibilities of the 
MOT. MAVCOM is  an autonomous body established to regulate and oversee economic and 
commercial issues and act as an independent advisor to the MOT. The DCA will continue to be the 
regulator for technical issues with responsibilities for overseeing safety, maintenance, an d security 
(Table 4.34).  
Table 4.34 Functions of the Department of Civil Aviation and the Malaysian Aviation 
Commissio n 
Department of Civil Aviation  Malaysian Aviation Commission  
 Exercise regulatory functions in respect of civil 
aviation and airport and aviation services including 
the establishment of standards and their enforcement  
 Represent the government of Malaysia in respect of 
civil aviation matters and to do all things necessary 
for this purpose  
 Ensure the safe and orderly growth of civil aviation 
throughout Malaysia  
 Encourage the development of airways and airport 
and air navigation facilities for civil aviation;  
 Promote the provision of efficient airport and aviation 
services by licensees  
 Promote the interests of users of airport and aviation 
services in Malaysia in respect of the prices charged 
for, and the quality and variety of, services provided 
by licensees   Regulate economic matters relating to the civil aviation 
industry  
 Provide a mechanism for the protection of consumers  
 Provide a mechanism for dispute resolution between 
the providers of aviation services  
 Administer, allocate and manage air traffic rights  
 Monitor slot allocation for airlines or other aircraft 
operators  
 Administer and manage public service obligations  
 Facilitate and coordinate matters of interest to the 
Malaysian civil aviation services and government 
agencies, locally and internationally  
 Issuing and renewing air service licences and permits, 
ground handling licences and aerodrome operator 
licences  
 Perform any other functions that are incidental or 
consequential to any of its functions under the MACA  
Source:  Civil Aviation Act, Article 2B;  and Malaysian Aviation Commission Act, Article 17.  
4.152.   In addition to the Civil Aviation Regulations of 2016 and the Malaysian Aviation 
Commission Act, other legislation relating to sector includes: the Civil Aviation Act No. 3 of 1969; 
the Carriage by Air A ct No. 148 of 1974; the Aviation Offences Act No. 307 of 1984; the Airport 
and Aviation Services (Operating Company) Act No. 467 of 1991; and the International Interest in 
Mobile Equipment (Aircraft) Act No. 659 of 2006.  
4.153.   Malaysia has been a member of the I nternational Civil Aviation Organization (ICAO) since 
1958 and is a signatory to the ICAO conventions. Malaysia Airlines and Malindo Air are members of 
the International Air Transport Association (IATA).  
4.154.   Under 11MP, the principal strategy affecting air tr ansport is to upgrade air navigation and 
airport infrastructure through a new Kuala Lumpur Air Traffic Control Centre at KLIA to replace the 
National Control Centre at Subang and upgrade the communication, navigation and surveillance as 
well as air traffic management systems. In addition, some airports are to be upgraded, including 
Langkawi International Airport (Kedah), and the Sultan Ismail Petra Airport (Kelantan), to cater for 
an expected increase in passenger numbers.  
4.155.   Air transport services contribute d RM 5.5 billion to GDP in 2016 and, in 2015, engaged 
32,293 persons. There are six international  airports77 and about 16 domestic airports serving 
domestic flights as well as a large number of landing strips for small aircraft. In 2016, in terms of 
passeng er numbers (not including transit), the biggest airport by far is KLIA which handled 
52.4 million  passenger s, of a total of 91.0 million for Malaysia as a whole . The next biggest are 
                                                
77 KLIA, Johor, Pulau Pinang, Langkawi, Kuching, and Kota Kinabala.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Kota Kinabalu (7.3  million), Pulau Pinang (6.7 million), and Kuching (4.9  million). In terms of 
cargo, KLIA is also the biggest with 642,558 tonnes out of a total of 873,434 tonnes ( Table 4.35). 
Table 4.35 Air transport, selected indicators , 2011 -16 
  2011  2012  2013  2014  2015  2016  
Total passengers 
(excluding transit)  million  64.7 68.0 81.0 85.1 85.9 91.5 
 KLIA  37.3 39.5 47.1 48.6 48.6 52.4 
 Subang   1.3 1.4 1.9 2.8 3.1 2.8 
 Pulau Pinang   4.6 4.8 5.5 6.0 6.3 6.7 
 Kota Kinabalu   5.8 5.8 6.9 6.8 6.6 7.3 
 Kuching   4.2 4.2 4.8 4.8 4.8 4.9 
 Langkawi   1.5 1.6 1.9 2.2 2.3 2.7 
 Johor Bharu   1.3 1.4 2.0 2.3 2.6 2.8 
 Miri  1.8 2.0 2.2 2.4 2.2 2.2 
Total cargo 
(excluding transit)  000 tonnes  894 880 897 987 959 873 
 KLIA  670 673 681 754 726 642 
 Subang   20 23 26 28 31 36 
 Pulau Pinang   122 114 112 119 113 113 
 Kota Kinabalu   28 23 22 24 25 29 
 Kuching   25 16 22 28 29 22 
 Langkawi   1 1 1 1 1 1 
 Johor Bharu   5 3 3 5 5 6 
 Miri  3 10 10 8 7 7 
Aircraft movements  000 645 659 776 835 857 854 
 KLIA  268 282 326 340 353 355 
 Subang   31 33 42 57 63 61 
 Pulau Pinang   51 50 57 63 65 64 
 Kota Kinabalu   60 58 68 69 67 69 
 Kuching   50 44 53 51 51 49 
 Langkawi   15 15 18 22 22 24 
 Johor Bharu   13 13 38 43 42 43 
 Miri  41 42 45 47 45 43 
Source:  Ministry of Transport (2016), Transport Statistic s Malaysia 2016.  
4.156.   All airports in Malaysia are owned by the State, except for Tanjung Manis Airport and 
Kerteh Airport.78 The government -linked company, Malaysia Airports Holdings Berhad (MAHB) , 
manages five of the six international airports, plus the 16 domestic airports and 18 of the short 
take-off and landing airports (STOLPorts). In addition to operations in Malaysia, MAHB also has 
investments abroad: Istanbul Sabiha Gokcen International Airport in Turkey; and Rajiv Gandhi 
International Airport serving Hyderabad in India. MAHB continued investment in Malaysia over the 
review period with the opening of KLIA2 in 2014 with a capacity of 45 million passengers per ye ar 
at a total cost of RM 4 billion. With the opening of KLIA2, the Low -Cost Carrier Terminal (LCCT) 
ceased operations on 9 May 2014 and low -cost airlines now operate out of KLIA2.  
4.157.   Among the state -owned airports, Senai International Airport (in Johor Bharu)  is the only 
airport not managed by MAHB. It is managed by Senai Airports Terminal Services Sdn Bhd under a 
concession agreement with the Federal Government. The concession agreement is for 50 years, 
starting in 2003.  
4.158.   MAVCOM is responsible for processing a nd allocating air service licences for the transport 
of passengers, mail, or cargo to or from Malaysia on scheduled services, air service permits for 
unscheduled services, ground handling licenses, and aerodrome operator licen ces. An applicant for 
one of t hese licences must have an air operator's certificate from the DCA. MAVCOM is also 
responsible for processing and allocating licences for aerodrome operations and ground handling.  
4.159.   Among the requirements for a licence or permit, the applicant must be a com pany 
incorporated in Malaysia which is directly or indirectly controlled by a Malaysian person:  
 for an air service licence under Article 35 of the Malaysian Aviation Commission Act, the 
applicant must be more than 50% owned by a Malaysian person;  
                                                
78 Tanjung Manis Airport is owned by Tg Manis Development Sdn Bhd (TMDSB) and Kerteh Airport is 
owned by Sanzbury Stead Sdn Bhd.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   for a p ublicly -listed company applying for an air service permit (Article 36), a ground 
handling licence (Article 37), or aerodrome operator licence (Article 38) a Malaysian person 
must hold a minimum of 33% of the applicant's shares; and  
 for a non -publicly -listed company applying for an air service permit (Article 36), a ground 
handling licence (Article 37), or aerodrome operator licence (Article 38) the Malaysian 
person must own more than 50% of the applicant's shares . 
 in all cases the Malaysian person must:  
 have the power to elect, appoint, remove or prevent from election, appointment or 
removal or cause to be elected, appointed, removed or prevented from being elected, 
appointed or removed, a majority of the directors in the applicant; or  
 have the power to make  or cause to be made, decisions in respect of the business or 
administration of the other person, and to give effect to such decisions or cause them to 
be given effect to; or  
 be a person in accordance with whose directions, instructions or wishes the directors, 
chief executive officer or senior officers of the other person are accustomed or under 
obligation, whether formal ly or informal ly, to act.  
4.160.   At July 2017, Malaysia was a party to 105 bilateral air service agreements of which 
20 were open skies arr angements. New agreements were reached with Uzbekistan (3 Oct ober 
2015), Serbia (20 Oct ober 2015), and Belize (8 May 2017).  
4.161.   In August 2017, seven airlines had air service licences, including Malaysia Airlines (the flag 
carrier) and its subsidiaries (MASwin gs and FlyFirefly); AirAsia and its long -haul sister airline 
AirAsia X; Malindo Airways; and Raya Airways.79 In 2016, Rayani Air's licence was revoked by 
MAVCOM as it "had breached the conditions of its ASL and lacks the financial and management 
capacity to  continue operating as a commercial airline".80 In addition, 22 airlines had air service 
permits.  
4.3.4.2   Maritime transport  
4.162.   The Marine Department of Malaysia in the Ministry of Transport is responsible for policy 
and regulation of marine transport and related issu es. The Department was established in 2011 
from the integration of three independent departments which had been responsible for policy and 
regulation for Peninsular Malaysia, Sabah, and Sarawak. The main functions of the Department 
include: ensuring safe n avigation of merchant vessels; providing services for merchant vessels 
such as inspection, certification, registration, and licensing; providing navigation services in 
Malaysian waters and ports; and supervising the examinations for seafarers.81  
4.163.   The Mariti me Institute of Malaysia (MIMA) is a policy research institute established by the 
Government under the Companies Act. Under the Federal Government Ministers ' Order No. 2 of 
2013, MIMA is to provide consultancy services to stakeholders through policy resear ch, training, 
education and public awareness programme s. MIMA speciali zes in research into maritime safety 
and security, ocean law, and maritime industries, and has a centre dedicated to the Straits of 
Malacca.82 
4.164.   The legal framework for maritime transport a nd related activities has not changed since 
the last review and the principal laws relating to shipping include:  
                                                
79 MAVCOM online information. Viewed at: http://www.mavcom.my/en/resources/licensing -and-
permits/  [October 2017].  
80 MAVCO M news release , 13 June 2016 , Malaysian Aviation Commission revokes Rayani Air's Air 
Service Licence. Viewed at: http://www.mavcom.my/en/2016/06/13/malaysian -aviation -commission -revokes -
rayani -airs-air-service -licence/?hilite=%22RAYANI%22  [October 2017].  
81 Marine Department Malaysia online information. Viewed at: 
http://www.marine.gov.my/jlmeng/index.asp#.WaQrYNKg8 -U [October 2017].  
82 Maritime Institute of Malaysia online information. Viewed at: http://www.mima.gov.my/index.php  
[October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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   the Carriage of Goods by Sea Act No. 527 of 1950 for maritime goods transport;  
 the Merchant Shipping Ordinance of 1952 for shipping, which was amended by the 
Merchant Shipping Ordinance (Amendment) Act No. 28 of 2017 (the amendment revises 
the ship registration and licensing framework to rationalize the ship registries );  
 for ports: the Port Authorities Act No. 487 of 1963; the Penang Port Commission Act 
No 138 of 1955; the Bintulu Port Authority Act No. 243 of 1981; and the Ports 
(Privati zation) Act No. 422 of 1990;83 and 
 Ports in Sabah and Sarawak are regulated by state ordinances.  
4.165.   Malaysia is a member of the International Maritime Organiza tion and has ratified many of 
its international conventions, including the Convention on  the International Maritime Organization, 
the Convention for the Safety of Life at Sea (SOLAS), the Convention for the Prevention of 
Pollution from Ships (MARPOL), and the Convention on Standards of Training, Certification and 
Watchkeeping for Seafarers (STCW) , among others .84 
4.166.   In 2015, there were about 993 enterprises involved in water transport, with gross output 
valued at RM 16.5 billion.85 
4.167.   The Malaysian Shipping Master Plan 2017 -2022, which was launched on 
6 September  2017, sets out the challenges facing the shipping industry, with a reduction in 
tonnage, increased reliance on foreign ships, and reflagging of Malaysian ships to other 
jurisdictions. The Plan focuses on a number of areas including, promoting employment of 
Malaysian ships and seafarers, facilitating access to capital and financing, improving Malaysia's 
attractiveness to shipping businesses, and promoting innovation and sustainable growth of 
maritime ancillar y services.86  
Shipping  
4.168.   In 2016, there were 5,477 ships registered in Malaysia for a total gross register tonnage 
(GRT) of 11.9 million, a slight increase compared to 2011 when there were 5,145 ships and GRT of 
11.5 million. Vessels may be registered with t he Malaysian Ship Registry or the Malaysian 
International Ship Registry ; parallel registration is not allowed. Vessels registered with the 
Malaysian Ship Registry ( Table 4.36) must be owned by a Malaysian citizen or an enterprise with 
at least 51% Malaysian shareholding ; the vessel owner must be incorporated and have an office in 
Malaysia; and the ship manager must be a Malaysian citizen or corporation.  
Table 4.36 Total vessels registered in the Malaysian Ship Registry by type, 2011 -16 
  2011  2012  2013  2014  2015  2016  
Oil tanker  Number  209 215 206 201 209 250 
 000 GRT  2,387  2,419  2,027  2,013  2,075  2,137  
LNG, LPG carrier  Number  43 41 40 40 38 40 
 000 GRT  2,534  2,373  2,371  2,371  2,211  2,594  
Chemical/Petroleum tanker  Number  66 63 53 49 47 46 
 000 GRT  905 822 571 453 391 369 
Bulk grain, ore, log carrier  Number  17 15 14 13 13 15 
 000 GRT  239 193 192 164 206 377 
General cargo, semi container  Number  527 491 577 575 489 491 
 000 GRT  578 579 580 578 575 565 
Passenger  Number  442 322 431 428 360 352 
 000 GRT  63 47 55 57 61 72 
Roll on – roll off  Number  12 10 00 10 12 11 
 000 GRT  101 130 195 157 229 190 
                                                
83 Ministry of Transport online information. Viewed at: http://www.mot.gov.my/en/maritime/act -
ordinance -warta -maritime  [October 2017].  
84 International Maritime Organization online information. Viewed at: 
http://www.imo.org/en/About/Conventions/StatusOfConventions/Pages/Default.aspx  [October 2017].  
85 Department of Statistics Malaysia (2016) , Economic Census 2016 - Transportation and Storage 
Services.  
86 Ministry of Transport (2017), Malaysia Shipping Master Plan 2017 to 2022. Viewed at: 
http://www.mima.gov.my/index.php/news -list/204 -malaysia -shipping -master -plan-2017-2022 
[October  2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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    2011  2012  2013  2014  2015  2016  
Full container  Number  53 33 29 27 27 32 
 000 GRT  710 218 190 182 195 288 
Offshore support vessel  Number  251 249 256 263 276 290 
 000 GRT  237 218 244 273 316 328 
Barge  Number  1,455  1,455  1,378  1,417  1,431  1,489  
 000 GRT  1,406  1,400  1,378  1,399  1,493  1,585  
Other  Number  2,070  2,136  2,104  2,116  2,232  2,461  
 000 GRT  2,335  2,618  2,451  2,691  2,906  3,434  
Total  Number  5,145  5,030  5,148  5,139  5,134  5,477  
 000 GRT  11,496  11,017  10,253  10,338  10,658  11,939  
Source:  Department of Statistics Malaysia (2016), Economic Census 2016 - Transportation and Storage 
Services . 
4.169.   Vessels registered with the Malaysian International Ship Registry (MISR), which is located 
in Labuan, must be owned by companies registered in Malaysia. However,  there are no limits to 
foreign equity parti cipation , although the ship manager must be a Malaysian citizen or corporation 
(Table 4.37). 
Table 4.37 Total vessels registered in the Malaysian International Ship Registry by type, 
2011 -16 
  2011  2012  2013  2014  2015  2016  
Anchor Handling, Standby, 
Supply  Number  -   3  2  4  10  7  
  GRT -   7,844  5,116  14,874  26,480  19,182  
Barge  Number  -   -   -   -   2  -   
  GRT -   -   -   -   37,221  -   
Other  Number  1  2  -   2  3  5  
  GT 19,902  11,288  -   62,003  10,084  14,187  
Total  Number  1  5  2  6  15  12  
  GRT 19,902  19,132  5,116  76,877  73,785  33,369  
Source:  Malaysian authorities.  
4.170.   Under the Merchant Shipping Ordinance, domestic shipping is reserved for Malaysian 
flagged vessels holding a domestic shipping licence where domestic shipping is defined as services, 
other than fishing, in the EEZ; or shipment of goods or carriage of passengers from one plac e to 
another in the EEZ.87 The criteria for a domestic shipping licence include the requirements that the 
vessel be owned by a Malaysian citizen or an enterprise with minimum 51% Malaysian ownership, 
the board of directors and the workforce must be at least  30% bumiputra , and at least 75% of the 
crew must be Malaysian. A temporary domestic shipping licence may be granted to a foreign 
registered vessel by the Domestic Shipping Licensing Board if it can be demonstrated that there is 
no Malaysian registered vessel available for a particular cargo and industry.   
4.171.   As noted in the last report, transhipment of containers by foreign vessels has been 
permitted on certain routes (a) between Penang and Port Klang; (b) Port Klang and Port of Pasir 
Gudang; (c) Port of Klang and Port of Tanjung Pelepas to Port of Sepangar,  Port of Bintulu and 
Port of Kuching; (d) Port Klang and Tanjung Pelepas Port; and (e) Port of Penang and Tanjung 
Pelepas Port.88 In addition, effective 1 June 2017, the transport of cargo services (including 
container) by foreign vessels are permitted on t he following routes: (i) between Peninsular 
Malaysia to any port in Sabah, Sarawak, Labuan; (ii) within Sabah; and (iii) within Sarawak  
4.172.   The principal business of the government -linked company MISC Bhd (62.67% owned by 
PETRONAS) comprises energy shipping an d its related activities, owning and operating offshore 
floating solutions, marine repair and conversion, engineering and construction works, and port and 
terminal services. MISC also runs the Malaysian Maritime Academy (ALAM) to provide education 
and trai ning for seamen and maritime personnel. As at December 2016, MISC owns and operates 
more than 110 vessels. The fleet comprises 91 petroleum and petroleum products tankers, 2 LNG 
Floating Storage Units, and 26 LNG vessels (which delivered 21.64 million tonn es of LNG in 2016  – 
representing 8% of total world LNG trade). Additionally, under the Offshore Segment, MISC owns 
and operates 14 floating facilities.89 
                                                
87 Merchant Shipping Ordinance, Part II B, Section 65A.  
88 WTO document WT/TPR/S/292/Rev.2, para 4.118  
89 MISC (2017), Annual Report 2016 – Dynamic Resilien t Synergistic, p. 61.  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.173.   International maritime transport is open to competition: traders are free to choose 
domestic or interna tionally registered shipping lines.  
4.174.   There are several government incentives for shipping including:  
 exemption from tax for income from transporting cargo and passengers on vessels 
registered in the Malaysian Ship Registry; and  
 exemption from personal inc ome tax for those working on Malaysian registered ships 
and dividends from profits from these activities.  
4.175.   In addition, the Global Maritime Ventures Bhd (GMVB), a subsidiary of the government -
owned Malaysia Development Bank, manages the RM 500 million Government's Shipping Ventures 
Fund (SVF). In 2016, following several years of losses, GMVB reported that: "The Group is in the 
midst of divesting itself of all of its existing investments by selling our assets and companies."90 
GMVB's role is to develop th e national shipping business sector through building strategic alliances 
with local partners to jointly acquire vessels for domestic and international operations.  
4.176.   The Malaysia Development Bank is responsible for the Maritime Fund and the Maritime 
Developm ent Fund. Under the RM 4.5 billion Maritime Fund and the RM 3.0 billion Maritime 
Development Fund, loans may be provided to Malaysian -owned (at least 51%) enterprises for: the 
acquisition of vessels; the acquisition of land, construction, and machinery for  shipping and port -
related infrastructure; to finance oil and gas related activities and services; and/or to part finance 
working capital requirements. The maximum tenure of the loans is 12 years. The annual interest 
rates on loans from the Maritime Develo pment Fund are 4% to 6%, and on loans from the 
Maritime Fund interest rates are 4.0% to 5.5%.91 
Ports  
4.177.   Federal ports are owned and regulated by the Ministry of Transport or by the states , while 
the ports in Sabah and Sarawak (except for Bintulu Port) are und er the jurisdiction of the state 
governments. Federal ports are administered by specific port authorities such as Port Kelang 
Authority (PKA), Penang Port Commission (PPC), Johor Port Authority (JPA), Kuantan Port 
Authority (KPA) and Bintulu Port Authority  (BPA). State ports are normally administered by the 
state governments such as Lumut Port, Sabah Port Authority (SPA), Rajang Port Authority (RPA) 
and Miri Port Authority (MPA).  
4.178.   Port operations have been extensively privati zed through concession agreement s to the 
private sector, with the exception of Sarawak's three ports (which are owned and operated by 
state statutory corporations). The latest concession agreements for the ports include the 2016 
agreement to operate the Port of Tanjung Bruas, Malacca. At  September 2017, the maximum 
foreign ownership in port operators is 40%.  
4.179.   Klang is the biggest port in Malaysia and is operated by two private entities: Northport (M) 
Bhd and Westports (M) Sdn Bhd. Port Klang also has significant transhipment traffic of con tainers. 
Port of Tanjung Pelepas, which is regulated by Johor Port Authority, is mainly dedicated to 
transhipment of containers ( Table 4.38). In 2016, according to the  World Shipping Council, Port 
Klang and Tanjung Pelepas were the 12th the 17th busiest container ports in the world.92 
4.180.   Some ports in Malaysia are relatively speciali zed such as Bintulu for LNG, petroleum, and 
palm oil; and Port Dickson for petroleum and fue l oil. In 2016, out of a total of 38 million tonnes of 
freight loaded in Bintulu, 25 million tonnes were LNG. 
                                                
90 Global Maritime Ventures (2016), Annual Report 2015 , p. 14. Viewed at: 
http://www.gmv.com.my/documents/3222 8/368636/GMV+Annual+Report+2015.pdf/a8653fbb -a51f-4df6-
896e-a4f0f3669fc3  [October 2017].  
91 Malaysia Development Bank online information. Viewed at: http://www.bpmb.com.my/maritime -
developmen t-fund1  and http://www.bpmb.com.my/maritime -fund1  [October 2017].  
92 World Shipping Council online information. Viewed at: http://www.worldshipping.org/about -the-
industry/global -trade/top -50-world -container -ports [October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 4.38 Main ports and activities , 2011-16 
  2011  2012  2013  2014  2015  2016  
Klang         
Export, total cargo  000 t freight  89,517  90,551  90,423  95,559  100,644  113,709  
Import, total cargo  000 t freight  104,651  107,356  109,855  121,730  119,142  131,748  
Transit, total cargo  000 t freight        
Export, containers  000 TEU  1,721  1,822  1,861  1,943  1,980  2,064  
Import, containers  000 TEU  1,795  1,873  1,907  1,962  1,976  2,039  
Transit, containers  000 TEU  6,089  6,307  6,582  7,041  7,931  9,107  
Tanjung Pelepas         
Export, total cargo  000 t freight  4,727  5,187  5,178  5,393  5,484  5,547  
Import, total cargo  000 t freight  1,259  1,412  1,584  1,823  1,988  2,134  
Transit, total cargo  000 t freight  106,803  109,658  113,286  124,314  128,807  119,5200  
Export, containers  000 TEU  285  309  311  323  326  327 
Import, containers  000 TEU  132  139  132  144  148  157 
Transit, containers  000 TEU  6,885  7,046  6,974  7,765  8,325  7,545  
Bintulu         
Export, total cargo  000 t freight  36,138  35,134  37,652  38,149  37,463  38,310  
Import, total cargo  000 t freight  4,252  4,888  4,824  5,644  5,824  6,310  
Transit, total cargo  000 t freight  1,313  1,136  1,329  1,602  1,450  1,379  
Export, containers  000 TEU  71 85 90 94 87 100 
Import, containers  000 TEU  78 88 91 95 85 103 
Transit, containers  000 TEU  67 58 70 81 72 74 
Total         
Export, total cargo  000 t freight  198,290  197,878  203,063  210,295  235,657  232,219  
Import, total cargo  000 t freight  187,997  188,656  189,868  202,260  201,686  213,182  
Transit, total cargo  000 t freight  108,736  111,309  115,265  126,677  130,871  121,579  
Export, containers  000 TEU  3,385  3,538  3,611  3,719  3,773  3,941  
Import, containers  000 TEU  3,310  3,411  3,497  3,579  3,639  3,804  
Transit, containers  000 TEU  13,283  13,608  13,769  15,076  16,464  16,851  
Source:  Malaysian authorities and Department of Statistics Malaysia (2016), Economic Census 2016 - 
Transportation and Storage Services.   
4.181.   Malaysia's GATS commitments include limitations on market access through commercial 
presence such that services may only be pro vided through a representative office, regional office 
or locally incorporated joint -venture corporation (JVC) with Malaysian individuals or 
Malaysian -controlled corporations. JVCs are generally either subject to maximum thresholds for 
foreign equity parti cipation or minimum bumiputera  shareholding requirements. However, 
additional commitments in the GATS Schedule state that: "The following services at the port are 
made available to international maritime transport suppliers on reasonable and non -discrimina tory 
terms and conditions: (1) Pilotage; (2) Towing and tug assistance; (3) Provisioning, fuelling and 
Watering; (4) Garbage collection and ballast waste disposal; (5) Port Captain's services; 
(6) Navigation aids; (7) Shore -based operational services essen tial to ship operations, including 
communications, water and electrical supplies; (8) Emergency repair facilities; and (9) Anchorage, 
berth and berthing Services" . 
4.182.   Since 2009, full foreign equity participation is allowed for the following maritime transpor t-
related services:  
 rental/ leasing services of ships that excludes cabotage and offshore trades (CPC 83103);  
 rental of cargo vessels without crew (Bareboat Charter) for international shipping 
(CPC 83103);  
 maritime agency services (CPC 7454); and  
 vessel sal vage and refloating services (CPC 7454).  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  4.3.5   Tourism  
4.183.   Tourism is important to Malaysia's economy, contributing 14.8% to GDP in 2016, 
compared to 12.8% in 2012. Out of a total of 27.8 million arrivals in 2016, nearly half were from 
Singapore, and most of the remainder were from other Asian countries ( Table 4.39). In 2016, 
tourism provided about 3.2 million jobs compared to 2.6 million in 2012.  
Table 4.39 Tourism indicators, 2012 to 2016  
  2012  2013  2014  2015  2016  
Receipts  RM billion  60.6 65.4 72.0 69.1 82.1 
       
Arrivals  million  25.03  25.72  27.44  25.72  26.76  
 of which        
 Singapore   13.01  13.18  13.93  12.93  13.27  
 Indonesia   2.40  2.55  2.83  2.79  3.05  
 China   1.56 1.79  1.61  1.68  2.12  
 Thailand   1.26  1.16  1.30  1.34  1.78  
 Brunei Darussalam   1.26  1.24  1.21  1.13  1.39  
 India  0.69  0.65  0.77  0.72  0.64  
       
Number of hotels   2,724  3,094  4,072  4,799  4,961  
Number of hotel rooms   195,445  209,527  262,021  304,721  321,972  
Source:  Tourism Malaysia. Viewed at: http://www.tourism.gov.my/statistics  [August 2017].  
4.184.   Healthcare travel grew rapidly to total revenue of RM 690 million and 770,000 foreign 
patients compared with RM 379 million and 393,000 foreign patients in 2010.93 Healthcare visitors 
entered Malaysia mainly for cardiology treatments followed by oncology, IVF, orthopaedic, and 
general sc reening. The main sources of healthcare visitors included Indonesia, China, India, and 
Japan.  
4.185.   In May 2013, the Ministry of Tourism was renamed the Ministry of Tourism and Culture 
and is responsible for policy development and regulation of the tourism secto r and licensing of 
tourism service providers. The Malaysian Tourism Promotion Board (MTPB), established under the 
Tourism Promotion Board Act No. 481 of 1992, is responsible for promoting Malaysia as a tourism 
destination and assisting tourism service prov iders. The Malaysia Healthcare Travel Council 
(MHTC) was established in 2009 under the Ministry of Health to promote healthcare travel, help 
cooperation between the public and private sector, and develop strategies for the sector.  
4.186.   Under the 11th Malaysia P lan, the importance of tourism for regional development is 
highlighted, and ecotourism and healthcare travel are among the services sectors identified as 
having strong potential for growth.94 Under the Malaysia Tourism Transformation Plan, the target 
for 20 20 is 36 million tourists and RM 168 billion in receipts. Tourism is also one of the twelve 
national key economic areas with twelve entry point projects identified for development.  
4.187.   Under the Tourism Industry Act, tourism service providers are required to r egister and/or 
obtain a licence before starting a tourism -related business activity.  These include licensing of tour 
operating business & travel agencies, tourist guides, tourism training institutes, excursion buses & 
hire drive cars (Sabah, Sarawak and La buan only).95 
4.188.   Foreign equity participation in several tourism -related activities is limited. Full foreign 
ownership is permitted for inbound travel services by travel agents and tour operator services; and 
some large -scale or high -end tourism services ( Table 4.40).  
                                                
93 Prime Minister's Department (2015), Eleventh Malaysia Plan 2016 -2020 – Anchoring Growth on 
People, Box 8 -1. 
94 Prime Minist er's Department (2015), Eleventh Malaysia Plan 2016 -2020 – Anchoring Growth on 
People, pp 8 -20 and 8 -39. 
95 Ministry of Tourism and Culture Malaysia online information. Viewed at: 
http://www.motac.gov.my/en/download/category/18 -pelesenan  [October 2017].  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Table 4.40 Foreign equity limits for tourism  
Investment  Foreign equity limits  
Hotels   
 1-2 star      0 
 3 star      70% (since 2015)  
 4.5 star     100%  
Projects   
 Theme parks      100%  
Convention centres   
 Less than 5,000 seating capacity      0 
 More than 5,000 seating capacity      100%  
Healthcare      100%  
Tour operator/travel agents   
 Inbound and ticketing  Singapore and Cambodia  70% 
Other ASEAN    51% 
Non-ASEAN    30% 
 Inbound      100%  
 Outbound      0 
Source:  Ministry of Tourism (2012), Policies, Guidelines and Potential Tourism Opportunities in Sabah , 
Tharsis C, Director, Strategic Planning & International Affairs Division.  
4.189.   Under the Promotion of Investments Act No . 327 of 1986 , incentives are available for a 
variety of tourism -related investments including establishment of budget hotels (1 -3 star); 
establishment of 4 -5 star hotels (to expire on 31 December 2018); expansion/moderni zation/ 
renovation of existing hotels (1 -5 star); establishment of tourist projects and theme parks; 
expansion/moderni zation of tourist projects and theme parks; establishment of recreational 
camps; and establishment of convention centres (with a hall of a t least 3,000 seating capacity). 
There has been no change to most of these incentives since the last review although some have 
been extended ( Table 4.41).96  
Table 4.41 Fiscal incentives for hotels and tourism projects, 2017  
Scheme  Eligibility  Incentives offered  
Pioneer Status  Companies undertaking new 
investments in 1 -5 star 
hotels  Five-year partial exemption from income tax payments. 
Requirement to pay tax on only 30% of statutory 
income, commencing from day of production. Possibility 
to carry forward unabsorbed capital allowances and 
accumulated losses  
Investment Tax 
Allowance (ITA)  Companies undertaking new 
investments  in 1-5 star 
hotels  Alternative to Pioneer Status. Allowance of 60% on the 
qualifying capital expenditure incurred within five years 
from date of expenditure. Companies may offset this 
allowance against 70% of statutory income in the first 
year of assessme nt. Carry forward of unutilized 
allowances  
Enhanced incentives 
for undertaking new 
investment in hotel 
and tourism projects  Companies undertaking new 
investments in 4  & 5 star 
hotels in Sabah and 
Sarawak (deadline for 
applications extended to 
end-2018)  Pioneer Status with income tax exemption of 100% for 
5 years. Possibility to carry forward unabsorbed capital 
allowances and accumulated losses; or  
ITA of 100% on qualifying capital expenditure incurred 
within 5  years. The allowance can be offset against 
100% of statutory income in year. Carry forward of 
unutilized allowances  
Incentives for 
reinvestments in 
hotels and tourism 
projects  Companies that reinvest in 
expanding/modernizing 1 -5 
star hotels  Pioneer Status with income tax exemption of 70% for 
5 years. Possibility to carry forward unabsorbed capital 
allowances and accumulated losses; or  
ITA of 60% on qualifying capital expenditure incurred 
within 5  years. The allowance can be offset against 
70% of statutory income each year. Carry forward of 
unutilized allowances  
                                                
96 WTO document WT/TPR/S/292/Rev.2, 8 April 2014, Section 4.7.6  WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  Scheme  Eligibility  Incentives offered  
Incentive for 
healthcare travel  Investment in construction 
of new private hospitals or 
expansion renovation of 
existing ones. Hospitals 
must be MOH -licensed and 
MHTC -registered (deadline 
for applications extended to 
end-2017)  ITA of 100%  on qualifying capital expenditure within 
5 years. The allowance can be offset against 100% of 
statutory income each year. Carry forward of unutilized 
allowances  
 
Healthcare travel: 
double deduction for 
accreditation 
expenses  Private hospitals incurring 
expenses in obtaining 
domestic/international 
accreditation  Double deduction on expenses incurred in obtaining 
domestic or internationally recognized accreditation. 
The accreditation body must be MOF -approved  
Incentives for the 
luxury yacht industry  Compan ies constructing 
luxury yachts  
 
 
Companies carrying out 
repair and maintenance 
services for luxury yachts in 
Langkawi  
 
Companies providing luxury 
yacht charter services  Pioneer status with income tax exemption of 70% for 5 
years. Unabsorbed capital allowan ces and accumulated 
losses may be carried forward  
 
Income tax exemption of 100% for 5 years  
 
 
 
 
Income tax exemption of 100% for 5 years  
Double deduction on 
overseas promotion 
and trade fairs  Hotels and tour operators  Double deduction on qualifying expenditure incurred for 
various promotional activities overseas and for 
participation in approved international trade fairs in 
Malaysia  
Tax exemption for 
tour operators  Tour operators licenced by 
Ministry of Tourism and 
Culture  Tour operators who bring in at least 750 foreign 
tourists in groups in a year are exempt from income 
tax related to the income derived from operating such 
tours 
Tour operators organizing domestic tour packages 
within Malaysia involving the participation of least 
1,500 local touris ts per year are exempt from income 
tax related to the income derived from operating such 
tours  
Tax exemption for 
organizing/ 
promoting 
international 
conferences and 
trade exhibitions  Companies promoting/ 
organizing international 
conferences in Malaysia  Tax exemption on income earned from bringing at least 
500 foreign participants into the country (applies to 
local companies promoting conferences only). Tax 
exemption for income earned from organizing approved 
international trade exhibitions, whereby the o rganizers 
bring in at least 500 foreign visitors per year (applies to 
both local and foreign companies)  
Deduction on cultural 
performances  Companies promoting and 
managing musical/cultural 
groups and sponsoring 
approved cultural 
performances  Single deduct ion for expenditure. Ceiling for deductions 
for local performances is RM 500,000 per year. Ceiling 
for deductions for foreign performances is RM  200,000 
per year  
Incentive for car 
rental operators  Car rental operators and 
tour operators  Car rental operators may receive a full excise duty 
exemption on purchase of national cars. Tour operators 
are eligible for a 50% excise duty exemption on locally 
assembled four -wheel -drive vehicles  
Tax exemptions on 
the value of 
increased exports  Healthcare services offered 
to foreign clientsa Tax exemption of 100% on the value of increased 
exports subject to 70% of the income for each year of 
assessment  
a Foreign clients are defined as: (a) a non -Malaysian citizen that participates in the "Malaysia My 
Secon d Home" programme and his/her dependants; (b) a non -Malaysian citizen holding a Malaysian 
student pass and his/her dependents; (c) a non -Malaysian citizen holding a Malaysian work permit 
and his/her dependents; or (d) a Malaysian citizen who is non -residen t and his/her dependents.  
Source:  Malaysian authorities and WTO document WT/TPR/S/292/Rev.2, 8 April 2014.  
 
 WT/TPR/S/366 /Rev.1  • Malaysia  
 
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  5  APPENDIX TABLES  
Table A1. 1 Merchandise exports by group of products, 2013 -16 
 2013  2014  2015  2016  
Total exports (US$ billion)  228.3  234.1  200.2  189.4  
 % of total exports  
Total primary products  38.7 37.8 33.1 31.3 
Agriculture  13.2 12.9 12.7 13.5 
Food 11.0 11.1 10.8 11.5 
4222 - Palm oil and its fractions  5.4 5.1 4.7 4.8 
4312 - Animal or vegetable fats and oils and their fractions, partly 
or wholly hydrogenated (…)  0.9 0.8 0.8 0.9 
Agricultural raw material  2.2 1.8 1.8 1.9 
Mining  25.6 25.0 20.4 17.9 
Ores and other minerals  0.5 0.5 0.9 0.9 
Non-ferrous metals  2.8 2.4 3.1 2.9 
6841 - Aluminium and aluminium alloys, unwrought  0.4 0.5 0.5 0.9 
Fuels 22.3 22.1 16.5 14.0 
334 - Petroleum oils and oils obtained from bituminous minerals, 
other than crude  8.5 7.9 5.3 5.9 
3431 - Natural gas, liquefied  8.3 8.4 6.0 4.1 
3330 - Petroleum oils and oils obtained from bituminous minerals, 
crude  4.5 4.5 3.4 3.0 
Manufactures  60.6 61.6 66.4 68.0 
Iron and steel  1.0 1.2 1.1 0.9 
Chemicals  6.6 6.8 7.2 7.6 
5121 - Acyclic monohydric alcohols  0.6 0.6 0.6 0.7 
Other semi -manufactures  4.8 4.4 4.6 4.2 
Machinery and transport equipment  38.1 38.8 41.9 43.2 
Power generating machines  0.2 0.2 0.3 0.3 
Other non -electrical machinery  3.5 3.6 4.3 4.5 
Agricultural machinery and tractors  0.1 0.1 0.1 0.1 
Office machines & telecommunication equipment  27.7 28.1 29.6 30.4 
7764 - Electronic integrated circuits and microassemblies  10.9 12.1 12.4 12.8 
7763 - Diodes, transistors and similar semiconductor devices; 
photosensitive semiconductor devices (...)  2.6 2.5 3.0 3.4 
7768 - Piezoelectric crystals, mounted; parts, n.e.s., of the 
electronic components of group 776  2.0 2.0 2.2 2.2 
7599 - Parts and accessories (...) suitable for use solely or 
principally with the machines of subgroups 751.1, 751.2, 751.9 
and group 752  2.4 1.9 1.9 1.6 
7527 - Storage units, whether or not presented with the rest of a 
system  1.9 1.7 1.6 1.6 
7529 - Data-processing equipment, n.e.s.  1.4 1.3 1.4 1.5 
7611 - Television receivers, colour (including video monitors and 
video projectors)  1.6 1.4 1.2 1.0 
7649 - Parts and accessories suitable for use solely or principally 
with the apparatus of division 76  1.0 1.0 0.9 0.9 
Other electrical machines  5.2 5.3 6.0 6.1 
7725 - Electrical apparatus for switching or protecting electrical 
circuits (...) for a voltage not exceeding 1,000  0.7 0.7 0.7 0.8 
Automotive products  0.7 0.7 0.8 0.8 
Other transport equipment  0.8 0.9 1.0 1.1 
Textiles  0.8 0.8 0.8 0.9 
Clothing  2.0 2.0 2.4 2.4 
8482 - Articles of apparel and clothing accessories, of plastics or of 
vulcanized rubber (other than hard rubber)  1.5 1.4 1.7 1.7 
Other consumer goods  7.3 7.5 8.4 8.8 
8747 - Oscilloscopes, spectrum analyzers and other instruments 
and apparatus for measuring or checking electrical quantities (...)  0.9 1.0 1.1 1.3 
8973 - Jewellery of gold, silver or platinum group metals (except 
watches and watch -cases) and goldsmiths' or silversmiths' wares 
(including set gems)  1.0 0.8 0.9 0.8 
8215 - Furniture, n.e.s., of wood  0.7 0.7 0.8 0.8 
Other  0.6 0.6 0.5 0.6 
Source:  UNSD, Comtrade database (SITC Rev.3).  WT/TPR/S/366 /Rev.1  • Malaysia  
 
- 133 - 
 
  Table A1. 2 Merchandise imports by group of products, 2013 -16 
 2013  2014  2015  2016  
Total imports (US$ billion)  205.8  208.8  176.2  168.4  
 % of total imports  
Total primary products  31.9 32.1 28.5 25.7 
Agriculture  9.7 9.7 10.5 10.4 
Food 7.6 7.9 8.7 8.7 
0989 - Food preparations, n.e.s.  0.6 0.6 0.7 0.7 
Agricultural raw material  2.1 1.7 1.7 1.7 
Mining  22.2 22.5 18.1 15.3 
Ores and other minerals  1.4 1.3 1.3 1.6 
Non-ferrous metals  4.6 4.4 4.4 3.4 
6821 - Copper, refined and unrefined; copper anodes for 
electrolytic refining; copper alloys, unwrought  1.9 0.9 1.2 1.0 
Fuels 16.2 16.8 12.4 10.3 
334 - Petroleum oils and oils obtained from bituminous minerals, 
other than crude  10.7 10.9 8.4 7.1 
3330 - Petroleum oils and oils obtained from bituminous minerals, 
crude  3.5 3.7 1.9 1.7 
3212 - Other coal  0.9 0.7 0.7 0.8 
Manufactures  65.9 65.8 69.3 72.5 
Iron and steel  3.6 3.5 3.1 3.2 
Chemicals  9.0 9.4 10.0 10.2 
Other semi -manufactures  4.2 4.2 4.6 4.9 
Machinery and transport equipment  42.6 41.9 43.4 45.3 
Power generating machines  1.2 1.2 1.2 1.5 
Other non -electrical machinery  6.7 6.7 7.0 7.3 
7284 - Machinery and mechanical appliances specialized for 
particular industries, n.e.s.  0.7 0.8 0.8 0.8 
Agricultural machinery and tractors  0.1 0.1 0.1 0.1 
Office machines & telecommunication equipment  21.9 22.5 23.4 23.9 
7764 - Electronic integrated circuits and microassemblies  7.6 8.8 8.8 9.6 
7768 - Piezoelectric crystals, mounted; parts, n.e.s., of the 
electronic components of group 776  6.1 6.1 6.2 6.1 
7599 - Parts and accessories (...) suitable for use solely or 
principally with the machines of subgroups 751.1, 751.2, 751.9 
and group 752  1.8 1.5 1.5 1.4 
7763 - Diodes, transistors and similar semiconductor devices; 
photosensitive semiconductor  devices (...); light -emitting diodes  1.1 1.2 1.4 1.3 
7643 - Transmission apparatus for radio -telephony, radio -
telegraphy, radio -broadcasting or television  1.3 1.1 1.3 1.0 
7649 - Parts and accessories suitable for use solely or principally 
with the apparatus of division 76  1.2 1.0 1.0 1.0 
Other electrical machines  5.7 5.3 5.8 6.0 
7722 - Printed circuits  0.9 0.8 0.9 1.1 
7725 - Electrical apparatus for switching or protecting electrical 
circuits, (...) for a voltage not exceeding 1,000  0.8 0.7 0.9 1.0 
Automotive products  3.5 3.2 3.6 3.6 
7843 - Other parts and accessories of the motor vehicles of groups 
722, 781, 782 and 783  1.0 1.1 1.4 1.3 
7812 - Motor vehicles for the transport of persons, n.e.s.  1.3 1.0 1.1 1.1 
Other transport equipment  3.7 3.0 2.4 3.1 
7929 - Parts, n.e.s. (not including tyres, engines and electrical 
parts), of the goods of group 792  0.6 0.7 0.8 0.9 
7924 - Aeroplanes and other aircraft, mechanically -propelled (other 
than helicopters), of an unladen weight exceeding 15,000 kg 1.9 1.4 0.6 0.8 
Textiles  0.7 0.7 0.9 1.0 
Clothing  0.5 0.5 1.1 1.2 
Other consumer goods  5.2 5.6 6.2 6.6 
8747 - Oscilloscopes, spectrum analyzers and other instruments 
and apparatus for measuring or checking electrical quantities (...)  0.4 0.5 0.7 0.7 
Other  2.2 2.1 2.1 1.8 
9710 - Gold, non -monetary (excluding gold ores and concentrates)  1.7 1.6 1.7 1.4 
Source:  UNSD, Comtrade database (SITC Rev.3).  
 WT/TPR/S/366 /Rev.1  • Malaysia  
 
- 134 - 
 
  Table A1. 3 Merchandise exports by destination, 2013 -16 
 2013  2014  2015  2016  
Total exports (US$ billion)  228.3  234.1  200.2  189.4  
 % of total exports  
Americas  10.1 10.4 11.6 12.5 
United States  8.1 8.4 9.5 10.2 
Other America  2.0 2.0 2.2 2.3 
Mexico  0.6 0.7 0.8 1.0 
Europe  9.6 10.2 10.9 11.5 
EU-28 9.1 9.5 10.1 10.2 
Germany  2.3 2.3 2.5 2.8 
Netherlands  2.9 3.1 3.0 2.8 
United Kingdom  1.0 1.0 1.2 1.1 
France  0.8 0.7 0.7 0.7 
Belgium  0.3 0.4 0.5 0.5 
EFTA 0.2 0.3 0.3 0.4 
Other Europe  0.4 0.3 0.5 0.9 
Turkey  0.4 0.3 0.5 0.9 
Commonwealth of Independent States (CIS)  0.5 0.5 0.5 0.4 
Africa  2.4 2.5 2.6 2.4 
Middle East  3.4 3.0 2.8 2.9 
United Arab Emirates  1.8 1.5 1.5 1.6 
Asia 73.9 73.4 71.5 70.2 
China  13.5 12.1 13.0 12.5 
Japan  11.0 10.8 9.5 8.1 
Other Asia  49.4 50.5 49.0 49.6 
Singapore  13.9 14.2 13.9 14.6 
Thailand  5.5 5.3 5.7 5.6 
Hong Kong, China  4.3 4.8 4.7 4.8 
India 3.6 4.2 4.1 4.1 
Indonesia  4.6 4.1 3.7 3.5 
Australia  4.1 4.3 3.6 3.4 
Viet Nam  1.9 1.9 2.2 3.0 
Korea, Republic of  3.6 3.7 3.2 2.9 
Chinese Taipei  3.0 3.2 3.0 2.7 
Philippines  1.3 1.6 1.7 1.7 
Bangladesh  0.7 0.5 0.5 0.7 
Pakistan  0.7 0.5 0.5 0.6 
Other  0.0 0.0 0.0 0.0 
Memorandum:      
ASEAN  28.0 27.9 28.1 29.4 
Source:  UNSD, Comtrade database.  
 WT/TPR/S/366 /Rev.1  • Malaysia  
 
- 135 - 
 
  Table A1. 4 Merchandise imports by origin, 2013 -16 
 2013  2014  2015  2016  
Total imports (US$ billion)  205.8  208.8  176.2  168.4  
 % of total imports  
Americas  11.8 12.2 10.9 10.8 
United States  7.8 7.7 8.1 8.0 
Other America  4.0 4.5 2.8 2.8 
Brazil  0.9 0.9 1.0 1.2 
Europe  12.1 11.8 11.9 11.3 
EU-28 10.8 10.4 10.1 9.9 
Germany  3.5 3.4 3.4 3.4 
France  2.1 1.8 1.3 1.4 
Netherlands  0.8 1.2 1.3 1.0 
United Kingdom  1.1 1.0 1.0 0.9 
Italy 0.9 0.9 0.8 0.8 
EFTA 1.1 1.3 1.5 1.2 
Switzerland  0.9 1.1 1.2 1.0 
Other Europe  0.1 0.1 0.3 0.2 
Commonwealth of Independent States (CIS)  0.7 1.1 0.6 0.7 
Africa  1.4 1.4 1.4 1.0 
Middle East  4.6 5.2 4.0 3.9 
Saudi Arabia, Kingdom of  1.0 1.4 1.1 1.5 
United Arab Emirates  2.3 2.3 1.8 1.4 
Asia 68.8 67.5 70.4 71.6 
China  16.4 16.9 18.9 20.4 
Japan  8.7 8.0 7.8 8.2 
Other Asia  43.7 42.6 43.7 43.1 
Singapore  12.4 12.5 12.0 10.4 
Thailand  6.0 5.8 6.1 6.1 
Chinese Taipei  4.9 5.0 5.3 6.0 
Korea, Republic of  4.7 4.6 4.5 5.2 
Indonesia  4.3 4.1 4.5 4.2 
Viet Nam  2.9 2.2 2.7 2.7 
India 2.5 2.0 2.2 2.4 
Australia  2.5 3.0 2.5 2.2 
Hong Kong, China  1.6 1.6 1.7 1.8 
Philippines  0.7 0.8 1.0 0.9 
Other  0.7 0.6 0.9 0.8 
Memorandum:      
ASEAN  26.7 25.7 26.6 24.6 
Source:  UNSD, Comtrade database.  
  
  WT/TPR/S/366/Rev.1 • Malaysia  
 
- 136 - Table A3. 1 Summary analysis of Malaysia's MFN tariff, 2013 and 2017  
 2013  2017  
No. of linesa Average (%)  Range 
(%) S.D. Duty 
free 
(%) No. of linesa Average 
(%) Range 
(%) S.D. Duty free 
(%) 
Total  9,417 (41)  5.6 0-90 9.5 64.6 11,690 (64)  7.5 0-90 10.9 56.2 
HS 01-24 1,526 (41)  2.4 0-90 7.0 74.7 1,789 (64)  2.7 0-90 7.4 73.1 
HS 25 -97 7.891  6.2 0-60 9.8 62.6 9,892  8.3 0-60 11.2 53.2 
By WTO category            
WTO agricultural products  1,255 (41)  2.9 0-90 7.6 70.9 1,441 (64)  3.3 0-90 8.2 67.6 
Animals and products  thereof  176 2.5 0-50 8.6 89.8 176 3.5 0-50 10.3 86.9 
Dairy products  38 4.5 0-50 13.4 81.6 46 3.7 0-50 12.3 84.8 
Fruit, vegetables, and plants  346 (1)  2.2 0-90 6.4 73.1 365 (1)  2.0 0-90 6.2 75.3 
Coffee and tea  29 6.2 0-15 6.0 41.4 43 5.5 0-15 5.8 44.2 
Cereals and preparations  161 6.3 0-50 12.4 60.9 202 7.8 0-50 13.1 55.9 
Oils seeds, fats, oil and their products  213 2.2 0-20 3.3 63.4 250 2.3 0-20 3.1 59.2 
Sugars and confectionary  22 2.3 0-15 4.9 81.8 31 3.1 0-15 5.8 77.4 
Beverages, spirits and tobacco  110 (40)  3.7 0-20 5.6 34.5 127 (63)  6.6 0-20 6.8 13.4 
Cotton  5 0.0 0-0 0.0 100.0  5 0.0 0-0 0.0 100.0  
Other agricultural products, n.e.s.  155 0.8 0-25 3.6 91.6 196 0.7 0-25 3.3 92.3 
WTO non -agricultural products  8,162  6.0 0-60 9.6 63.6 10,249  8.0 0-60 11.1 54.6 
Fish and fishery products  349 0.9 0-20 2.9 88.8 439 0.7 0-20 2.5 91.8 
Minerals and metals  1,235  8.7 0-60 10.6 44.3 1,619  8.9 0-60 10.4 38.5 
Chemicals and photographic supplies  1,261  4.4 0-50 8.3 73.0 1,625  4.2 0-50 8.1 74.9 
Wood, pulp, paper and furniture  1,833  2.7 0-40 6.9 84.4 801 7.0 0-40 9.5 58.4 
Textiles  810 8.9 0-30 7.2 30.9 857 9.2 0-30 7.6 33.0 
Clothing  248 0.2 0-20 1.6 98.8 351 0.1 0-20 1.4 99.1 
Leather, rubber, footwear and travel 
goods  319 11.4 0-40 13.5 48.6 345 11.1 0-40 13.2 46.4 
Non-electric machinery  709 5.0 0-35 9.4 69.4 1,340  4.9 0-35 9.3 67.5 
Electric machinery  381 6.2 0-30 9.5 62.7 739 5.8 0-30 8.8 61.4 
Transport equipment  410 17.6 0-50 13.3 22.9 1,332  21.6 0-50 12.2 14.4 
Non-agricultural products,  n.e.s.  575 5.6 0-50 9.6 63.5 757 5.3 0-50 9.5 66.7 
Petroleum  32 0.5 0-5 1.5 90.6 44 0.3 0-5 1.3 93.2 
By ISIC Rev.2 sector            
ISIC 1 - Agriculture, hunting and fishing  1,305 (1)  1.1 0-90 5.7 92.0 807 (1)  1.9 0-90 7.6 85.7 
ISIC 2 - Mining  116 0.9 0-30 3.6 90.5 123 1.0 0-30 3.7 88.6 
ISIC 3 - Manufacturing  7,995 (40)  6.4 0-60 9.8 59.7 10,759 (63)  8.0 0-60 11.0 53.6 
Manufacturing excluding food processing  6,936  7.0 0-60 10.1 57.7 9,583  8.6 0-60 11.2 51.9 
ISIC 4 - Electrical energy  1 0.0 0-0 0.0 100.0  1 0.0 0-0 0.0 100.0  
By stage of processing            
First stage of processing  1,695 (1)  1.3 0-90 6.1 91.6 1,259 (1)  2.0 0-90 7.5 87.0 
Semi-processed products  3,118  5.5 0-50 8.3 61.0 3.102  6.3 0-50 8.3 55.0 
Fully processed products  4,604 (40)  7.2 0-60 10.7 57.1 7,329 (63)  9.0 0-60 11.9 51.5 
By HS section            
01 Live animals and products  478 2.1 0-50 8.6 89.1 609 2.1 0-50 8.7 90.8 
02 Vegetable products  399 (1)  2.5 0-90 7.8 74.9 499 (1)  2.2 0-90 7.6 79.4 
03 Fats and oils  171 2.6 0-20 3.6 58.5 203 2.7 0-20 3.4 53.2 
04 Prepared food, beverages and tobacco  478 (40)  2.6 0-20 4.9 65.9 487 (63)  4.1 0-20 6.2 52.8 
05 Mineral products  202 1.4 0-50 5.3 87.6 220 1.5 0-50 5.5 87.7 
06 Chemicals and products thereof  1,025  2.0 0-50 6.3 86.6 1,335  2.0 0-50 6.3 86.7  
  WT/TPR/S/366/Rev.1 • Malaysia  
 
- 137 -  2013  2017  
No. of linesa Average (%)  Range 
(%) S.D. Duty 
free 
(%) No. of linesa Average 
(%) Range 
(%) S.D. Duty free 
(%) 
07 Plastics, rubber, and articles thereof  563 13.4 0-40 11.3 28.6 634 13.1 0-40 11.1 28.4 
08 Raw hides and skins, leather, and its 
products  82 0.4 0-10 1.9 96.3 92 0.3 0-10 1.8 96.7 
09 Wood and articles of wood  1,511  1.4 0-40 5.3 91.9 440 5.2 0-40 9.1 69.5 
10 Pulp of wood, paper and paperboard  294 10.4 0-25 9.6 38.8 330 10.5 0-25 9.4 36.1 
11 Textiles and textile articles  1,025  6.4 0-30 7.0 48.5 1,176  6.2 0-30 7.4 53.6 
12 Footwear, headgear, etc.  71 6.3 0-30 9.4 60.6 85 5.1 0-30 8.7 67.1 
13 Articles of stone, plaster, cement  188 17.3 0-60 13.5 26.1 258 17.8 0-60 14.8 25.6 
14 Precious stones and metals, pearls  58 0.4 0-10 1.7 93.1 86 0.6 0-10 2.1 90.7 
15 Base metals and articles thereof  823 9.3 0-30 9.4 33.3 1,089  9.0 0-30 8.4 27.6 
16 Machinery, electrical equipment, etc.  1,140  5.0 0-35 9.2 69.3 2,163  4.9 0-35 9.0 67.3 
17 Transport equipment  422 17.3 0-50 13.3 23.7 1,346  21.5 0-50 12.3 14.9 
18 Precision equipment  244 0.8 0-35 3.9 92.2 328 0.6 0-35 3.3 94.5 
19 Arms and ammunition  22 13.6 0-30 12.4 9.1 30 14.3 0-30 12.9 13.3 
20 Miscellaneous manufactured articles  213 9.5 0-50 11.3 44.6 272 10.3 0-50 11.2 39.3 
21 Works of art, etc.  8 1.3 0-5 2.2 75.0 8 0.6 0-5 1.7 87.5 
S.D. Standard deviation.  
a Number in brackets refers to tariff lines with a specific rate that have been excluded from the calculations.  
Note:  Calculations exclude in -quota rates and specific rates and include the ad valorem  part of compound and alternate rates. The 2013 tariff is based on HS12 and the 2017 
tariff is based on HS17 nomenclature.  
Source:  WTO Secretariat calculations, based on data received by the authorities.  
__________