RESTRICTED  
  
WT/TPR/G/366  
20 December  2017 
(17-7101) Page: 1/33 
Trade Policy Review Body  Original: English  
 
TRADE POLICY REVIEW  
REPORT BY  
MALAYSIA  
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the 
Marrakesh Agreement Establishing the World Trade Organization), the policy statement by 
Malaysia  is attached.  
 
 
Note: This report is subject to restricted circulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Malaysia . WT/TPR/G/366 • Malaysia  
 
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  Contents  
1   INTRODUCTION  ................................ ................................ ................................ ..........  3 
2   ECONOMIC DEVELOPMENT  ................................ ................................ ..........................  3 
2.1   Overview  ................................ ................................ ................................ ....................  3 
3   TRADE POLICY DEVELOP MENTS  ................................ ................................ ..................  7 
3.1   Overview  ................................ ................................ ................................ ....................  7 
3.2   Initiati ves to Facilitate Trade  ................................ ................................ .........................  7 
3.3   Multilateral Trading System  ................................ ................................ ......................... 14 
3.4   Development in FTAs  ................................ ................................ ................................ ..15 
3.5   ASEAN  ................................ ................................ ................................ ...................... 18 
3.6   Asia Pacific Economic Cooperation  ................................ ................................ ................ 19 
4   CHALLENGES AND OPPOR TUNITIES OF EXTERNAL  ENVIRONMENT  ...........................  20 
4.1   Overview  ................................ ................................ ................................ ................... 20 
4.2   BREXIT  ................................ ................................ ................................ ..................... 20 
4.3   U.S. Trade Policies  ................................ ................................ ................................ ......21 
4.4   Belt and Road Initiative  ................................ ................................ ............................... 21 
4.5   EU’s Resolution on Palm Oil and Deforestation of Rainforest  ................................ ............. 21 
5   SECTORAL POLICIES  ................................ ................................ ................................ . 22 
5.1   Manufacturing Sector  ................................ ................................ ................................ ..22 
5.2   Agriculture Sector  ................................ ................................ ................................ .......23 
5.3   Services Sector  ................................ ................................ ................................ .......... 24 
6   OTHER DOMESTIC POLICIE S ................................ ................................ .....................  29 
6.1   Competition Act 2010  ................................ ................................ ................................ .29 
6.2   Strategic Trade Act 2010  ................................ ................................ ............................. 29 
6.3   National Policy on Biological Diversity 2016 -2025 ................................ ........................... 30 
6.4   Companies Act 2016  ................................ ................................ ................................ ...30 
6.5   E-Commerce and Digital Economy in Malaysia  ................................ ................................ 31 
7   WAY FORWARD  ................................ ................................ ................................ .........  32 
TABLES  
 
Table 2.1 List of Thrusts and Number of Targeted Goals (KPIs) in the 11MP  ...............................  3 
Table 3.1 Malaysia’s External Trade 2013 -17 ................................ ................................ ..........  7 
Table 3.2 6 HIPs of SME Masterplan  ................................ ................................ ..................... 12 
 
 
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  1  INTRODUCTION  
1.1.  This is  Malaysia’s Seventh Trade Policy Review at the World Trade Organisation (WTO). Trade 
has historically been an engine of growth and continues to play an important role in the Malaysian 
economy. Malaysia’s trade policy is aimed at creating a free and fair tr ading environment with a 
vision to make the country one of the most competitive trading nation by 2020.  
1.2.  Malaysia’s trade performance continued to improve during the period under review despite 
the uncertainty in the global market, weak aggregate demand, l ow commodity prices and volatile 
financial markets in major economies. Domestically, policies continue to focus on high value and 
knowledge -intensive industries. With the aim of becoming a high -income nation by 2020, 
emphasis has been placed on integrating  Malaysian companies into Global Value Chains (GVC) and 
developing commercial ties with new markets.  
1.3.  The WTO is an important feature of Malaysia’s overall trade and investment policy. The rules -
based multilateral trading system creates opportunities for Ma laysian business through trade 
liberalisation in a fair trading environment. To complement the multilateral process, Malaysia 
continues to negotiate bilateral, regional and plurilateral trade agreements as a means to obtain 
preferential and effective marke t access.   
1.4.  Apart from economic engagements with ASEAN countries and other key economic partners 
such as China, the European Union (EU), the United States (U.S.) and Japan, Malaysia is also 
actively promoting trade with new markets in Africa, Latin America  and West Asia. To accelerate 
the growth of a new wave of exports, the services sector, and small and medium enterprises 
(SMEs) have been identified as the targeted areas to be promoted under the Eleventh Malaysia 
Plan 2016 -2020 (11MP).   
2  ECONOMIC DEVELOPMENT  
2.1  Overview  
Domestic Economy  
2.1.  The coherent economic and industrial planning policies introduced by the Government, 
specifically the five -year Malaysia Plan and the New Economic Model (NEM), identified specific 
economic objectives and industry guide lines for the development of the nation. The core and focus 
areas embedded under these policies will be aggressively implemented to achieve the projected 
growth targets set by the Government.  
2.2.  The 11MP which was launched in May 2015 emphasizes not only on e conomic development 
but also has a special focus on the need for greater inclusiveness. A monitoring mechanism has 
been established to ensure all the outcomes are met. In addition to the inclusive strategy, 
emphasis is also given to enhance productivity gr owth and promoting quality investment in higher 
value -added industries. The thrusts outlined in the 11MP and number of targeted goals (KPIs) are 
as follows:  
Table 2.1 List of Thrusts and Number of Targeted Goals (KPIs) in the 11MP  
Thrust  Details  No. of KPIs  
1 Enhancing Inclusiveness Towards an Equitable Society  17 
2 Improving Wellbeing for All  15 
3 Accelerating Human Capital Development for an Advanced Nation  20 
4 Pursuing Green Growth for Sustainability and Resilience  10 
5 Strengthening Infrastructure to Support Economic Expansion  20 
6 Re-engineering Economic Growth for Greater Prosperity  29 
Chapter 9  Transforming Public Service for Productivity  9 
TOTAL   120 
2.3.  The Government is committed to ensure the nation’s economic growth despite external 
uncertainties. During the period under review, the Malaysian economy continued on a positive 
trajectory, recording an average GDP growth of 5.1% for the period 2014 to 2016 . Real GDP 
growth was 6.0% in 2014, 5.0% in 2015 and 4.2% in 2016. The positive momentum was WT/TPR/G/366 • Malaysia  
 
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  supported by private investment and private consumption. In 2016, the per capita Gross National 
Income (GNI) of Malaysia increased to US$9,850.  
2.4.  The Malaysian econo my has been gaining momentum in the first half of 2017. In the first 
quarter of 2017, the economy recorded a robust expansion of 5.6% compared to 2016. The 
economy continued to remain resilient in the second quarter, registering a growth of 5.3%. During 
this period, consumer spending surged 7.1% from the previous year.  
Sectoral Performance  
2.5.  On the production side, all economic sectors continued to expand in 2016, with the exception 
of the agriculture sector. Services, manufacturing and construction sectors spearheaded the 
economy, expanding by 5.6%, 4.4% and 7.4% respectively. These three sectors contributed 
81.8% to GDP. The mining sector moderated by 2.2% while agriculture sector posted a negative 
growth of 5.1% as crude palm oil output was affected by the  El Niño weather phenomenon.  
2.6.  The inflation rate increased in 2014 at 3.1%, among the highest since 2008 due to the fuel 
subsidy rationalization introduced and implemented in December 2014. In 2015, the inflation rate 
eased to 2.1% due to the collapse in gl obal oil prices in spite of the implementation of the Goods 
and Services Tax (GST). The inflation rate remained stable at 2.1% in 2016 following the low base 
effect, the restructuring of the cooking oil price stabilization scheme effective from November 20 16 
as well as the rebound in petrol and diesel retail prices.  
2.7.  The labour force continues to show steady improvement, increasing from 13.9 million in 2014 
to 14.7 million in 2016. Unemployment rate remains relatively low at 3.4% in 2016, with the 
services s ector being the key contributor of employment at 62.2% followed by the manufacturing 
sector at 16.9%.  
2.8.  The services sector registered an average growth of 6.4% for the period 2010 to 2016. The 
services sector continued to account for the largest share of GD P, accounting for 54.3% of the 
GDP in 2016 compared to 53.5% in the previous year. The sector remains on track to meet the 
targeted goal of 56.5% set under the 11MP.  
2.9.  The overall performance of the manufacturing sector improved significantly in 2014, growin g 
by 6.2% compared to a modest growth of 3.4% in 2013. In 2015, the manufacturing sector 
expanded moderately, at 4.9%, attributable mainly to the continued strength of the export -
oriented industries driven by strong expansion in the electrical and electron ics (E&E) cluster and 
sustained regional demand for chemical products. The domestic -oriented industries, on the other 
hand, moderated, mainly as a result of the slower growth in the consumer -related cluster. 
Meanwhile, in 2016, the expansion of the domesti c-oriented industries has strengthened alongside 
the export -oriented industries - boosted by the recovery in global semiconductor demand in the 
second half of the year. This has supported the expansion of the manufacturing sector by 4.4%.  
2.10.   Manufacturing sec tor expanded further to 6.0% in the second quarter of 2017 from 5.6% in 
the previous quarter. E&E and optical products were the main impetus for this sector with a growth 
of 9.8%, supported by higher production of semiconductors and consumer electronics. I n addition, 
vegetable and animal oils & fats and food processing also accelerated, to 10.4%.  
2.11.   The contribution of the agriculture sector to the GDP contracted to 5.1% in 2016 compared 
with 8.9% in 2015. Oil palm was a major contributor at 43.1%, followed by  other agriculture 
(19.5%), livestock (11.6%), fishing (11.5%), forestry & logging (7.2%) and rubber (7.1%). The 
agriculture sector grew at a moderate pace of 5.9% in the second quarter of 2017 after posting a 
growth of 8.3% in the previous quarter. Oil pa lm and rubber continued to register a double -digit 
growth albeit at a slower momentum of 12.1% and 17.0%, respectively.  
2.12.   Exports of commodity and commodity -based products in 2015 increased by 
RM 583.9  million or 0.5% to RM  117.1 billion compared with RM  116.5 billion recorded in 2014. 
Exports of commodity and commodity -based products grew further by RM  4.9 billion or 4.19% to 
RM 122 billion in 2016. The higher exports was contributed by increased exports of palm oil and 
palm-based products, timber and timber -based products as well as cocoa and cocoa -based 
products. In the first quarter of 2017, exports of commodity and commodity -based products WT/TPR/G/366 • Malaysia  
 
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  increased by RM  7.8 billion or 28.4% to RM  35.4 billion compared with RM  27.6 billion recorded in 
the corresponding p eriod of 2016.  
2.13.   The construction sector registered an outstanding average growth of 10.1% during the 
Tenth Malaysia Plan 2011 -2015 (10MP), surpassing the performance of all other economic sectors 
in the country. The sector maintained its double digit growth  at 11.7% in 2014, making this the 
record for three consecutive years (2012 -2014). In 2015, the last year of the 10MP, the growth of 
the sector slowed down to 8.2% and moderated at 7.4% in 2016 due to the easing in residential 
and civil engineering constru ction activities. In the second quarter of 2017, the sector recorded an 
expansion of 8.3%. The continued expansion was contributed by several mega construction 
projects including the Mass Rapid Transit (MRT) project, Manjung and Tanjung Bin Coal -Fired 
Power Plant, Pengerang Refinery and Petrochemical Integrated Development Project (RAPID), 
Phase 2 Duta – Ulu Kelang Expressway (DUKE), and PETRONAS LNG Train 9 project in Bintulu.  
2.14.   The mining sector recorded a growth of 3.3%, 4.7% and 2.7% from 2014 to 2016, 
respectively. The growth was mainly contributed by a higher production of crude oil and gas from 
new ramped up activities and new production fields. There was a significant increase in production 
of non -metallic minerals during the period (2014 -2016) to ful fil domestic demand for mega 
infrastructure and construction projects identified under the Economic Transformation Programme 
(ETP).  
2.15.   Private investments for the period 2014 -2016 grew in average by 9.16%. For the period 
January -March 2017, private investmen ts grew by 14.8% compared with the same period of 2016. 
During this period, the net foreign direct investment (FDI) grew by 9.0% compared to the 
corresponding period of 2016.  
2.16.   Private consumption expenditure grew at 6.3% per annum for the period 2014 to 201 6, 
supported by stable employment conditions, sustained wage growth, manageable inflation and 
governmental assistance to households. In the second quarter of 2017, the private final 
consumption grew 7.1% stimulated by the higher consumption on food and non -alcoholic 
beverages, communication, and restaurants and hotels.  
2.17.   Gross National Savings (GNS) continued to remain high, averaging 29.5% of GNI in 2014 -
2016, enabling Malaysia to finance its economic activities from domestic sources.  
2.18.   Malaysia maintained a c urrent account surplus with the reserves position remaining strong. 
In 2014, despite a challenging trading environment particularly during the second half of the year, 
the current account remained in surplus, recording RM  48.6 billion or 4.5% of GNI. Durin g the 
second quarter of 2017, the current account balance registered a higher surplus at RM  9.6 billion 
compared to RM  5.3 billion in the previous quarter. This higher surplus was due to lower deficit in  
the services and income accounts with higher surplus  in the goods account at RM  27.0 billion.  
2.19.   The international reserves of Bank Negara Malaysia amounted to US$100.4 billion 
(equivalent to RM  431.0 billion) as at 15 August 2017. The reserves position is sufficient to finance 
7.9 months of retained imports and is 1.1 times the short -term external debt.  
2.20.   Private investment recorded a growth rate of 10.8% for the period 2011 to 2016. This rate 
is double the growth rate registered for 2006 to 2010, at 5.5%. The share of private investment 
from total investment h as also increased from 55% in 2010 to 67% in 2016. This demonstrates 
the confidence of the private investors in the strength of Malaysia's economy . 
Transport Connectivity  
2.21.   Investment in transport infrastructure and development of transportation services are  
fundamental enablers to spur economic and social growth. During the 11MP, the transport and 
logistics sector continues to remain a crucial driver of growth – leveraging new investments in 
road, rail and air services to boost regional development.  
2.22.   Towards  this end, Malaysia is committed to undertake the various transport infrastructure 
projects under the 11MP. Some of the large -scale projects have been implemented. These were 
the Klang Valley Mass Rapid Transit (KVMRT) Line 1, Electrified Double -Track Rail way from Ipoh to WT/TPR/G/366 • Malaysia  
 
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  Padang Besar, Light Rail Transit (LRT) extension and Kuala Lumpur International Airport 2 
(KLIA2). The future projects to be implemented during the 11MP are the Pan -Borneo Highway, 
Klang Valley Mass Rapid Transit (KVMRT) Line 2, East Coast  Rail Link (ECRL), Electrified Double -
Track Railway from Gemas to Johor Bahru and the High Speed Rail connecting Kuala Lumpur to 
Singapore. The expansion of these networks will create new corridors of economic activity. Better 
integration of these differen t transport modes will also create seamless connectivity for people and 
goods. The Government will continue to work with the private sector to create an integrated 
logistics system. Coupled with efficient trade facilitation, this will further boost Malaysi a’s trade.  
2.23.   Priority will also be given to the construction of roads, connecting villages as well as linking 
villages with the nearest towns. Under the 11MP, 3,000 kilometres of paved roads will be 
constructed. The linkage between rural and urban areas will  be strengthened by improving 
connectivity and mobility to foster greater economic integration. For instance, the Pan Borneo 
Highway is expected to promote better connectivity for movement of people, goods and services in 
Sabah and Sarawak.  
2.24.   To further enha nce rural connectivity, the Government has launched the ECRL project to 
connect Klang Valley to the East Coast. The ECRL, with 688 -km rail that connects several 
townships and will be built in phases, would be a game -changer for the east coast corridor of 
Malaysia. The project can accelerate the GDP growth of this region by an additional 1.5% and will 
help reduce the gap between the west coast and east coast of Malaysia. This project is expected to 
be completed by July 2024.  
2.25.   Malaysia will continue to enhance  connectivity and safety of Rural Air Services (RAS) by 
improving Short Take -Off & Landing Airports (STOLports). The construction of a new airport in 
Mukah will be completed in 2018 and the relocation of the STOLports in Sarawak to suitable sites 
will be c arried out under  the 11MP.  
Introduction of Good and Services Tax (GST)  
2.26.   The Government implemented the GST on 1 April 2015, to replace the Sales and Services 
Tax regime. The GST implementation is part of the Government’s tax reform programme to 
streamline  the country’s tax system so that it would be more efficient, transparent and business -
friendly.  
2.27.   In principle, GST is imposed on all goods and services either produced in the country or 
imported, at a standard rate of 6%. However, certain supplies of goods  and services are not 
subject to GST and these are classified as follows:  
i. Zero-rated supplies:  
 taxable supplies which are subject to a zero rate, that is not liable to GST at the 
output or input stage.  
ii. Exempt supplies:  
 non-taxable  supplies which are not subject to GST at the output stage that is, 
when supplied to the consumer. However, the GST paid on input by the 
businesses cannot be claimed as tax credit.  
2.28.   Businesses with annual sales turnover of RM  500,000 and above are liable to  be registered 
under GST. But, businesses having an annual sales turnover of less than this threshold amount 
can apply for voluntary registration. As of July 2017, 448,159 businesses (including voluntary 
registrants) have registered under the GST. The GST revenue collected for 2016 amounted to 
RM 41.2 billion and is projected to reach RM  41.5 billion in 2017.  
Minimum Wage Policy  
2.29.   To address the inefficiencies in the labour market, the minimum wage policy was 
implemented on 1 January 2013. The objectives of t he policy is to ensure the basic need of 
workers and their families are fulfilled, provide sufficient social protection to workers, encourage WT/TPR/G/366 • Malaysia  
 
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  industries to move up the value chain by investing in higher technology and increase labour 
productivity and reduc e the nation’s dependence on unskilled foreign labour.  
2.30.   To achieve its objectives, the policy is further complemented by productivity enhancing 
measures such as the provision of training to up -skilled workers, improvements in the quality of 
education, and the facilitation of investment in automation and advanced technology.  
Minimum Wages Order 2016  
2.31.   On 1 July 2016, the Minimum Wages Order came into effect. It is applied to all workers 
including foreigners, in formal sectors with the minimum rate of RM  1,000 per month in Peninsular 
Malaysia and RM  920 per month in Sabah, Sarawak and Labuan. The Government strictly enforces 
this Order via the statutory inspections conducted by the Department of Labour.   
3  TRADE POLICY DEVELOP MENTS  
3.1  Overview  
3.1.  In 2016, the trade val ue was at RM  1.484 trillion (US$357.8 billion), an increase of 3% 
compared with RM  1.448 trillion (US$442.8 billion) in 2014. Between January to July 2017, the 
trade value was recorded at RM  1.008 trillion (US$230.5 billion), expanding by 22.7% compared to  
the corresponding period of 2016. The expansion was supported mainly by trade with ASEAN, 
China, the U.S., the EU, Japan, India and Chinese Taipei.  
Table 3.1 Malaysia’s External Trade 2013 -17 
 Total Exports  Total Imports  Trade Balance  Total Trade  
Year RM Bil Growth  
Rate  % RM Bil Growth  
Rate  % RM Bil Growth  
Rate  % RM Bil Growth  
Rate  % 
2013 719.99   648.69   71.30   1,368.69   
2014a 765.42  6.3 682.94  5.3 82.48  15.7 1,448.35  5.8 
2015 777.36  1.6 685.78  0.4 91.58  11.0 1,463.13  1.0 
2016b 785.93  1.1 698.66  1.9 87.27  -4.7 1,484.60  1.5 
2016 
(Jan-July)c 433.01  0 389.17  0 43.84  0 822.17  0 
2017 
(Jan-July)d 529.68  22.3 478.71  23.0 50.97  16.3 1008.00  22.7 
a US$1: RM  3.3.  
b US$1: RM  4.1.  
c US$1: RM  4.1.  
d US$1: RM  4.  
3.2.  Despite the challenges, exports increased to RM  785.9 billion (US$189.4 billion) in 2016 from 
RM 765.4 billion (US$233.9 billion) in 2014, while imports reached RM  698.7 billion 
(US$168.4  billion) from RM  682.9 billion (US$208.9 billion). For the first 7 months of 2017, 
exports increased by 22.3% to RM  529.6 billion (US$121.2 billion) while imports rose by 23% to 
RM 478.7 billion (US$109.5 billion), resulting in a trade surplus of RM  51.0 billion 
(US$11.7  billion).  
3.3.  Malaysia’s trade balance expanded from RM  82.5 billion (US$25.1 billion) in 2014 to 
RM 87.3 billion (US$21.0 billion) in 2016. For the period January -July 2017, the trade balance 
increased by 16.3% from the corresponding period of 2016.  
3.2  Initiatives to Facilitate Trade  
3.4.  Various initiatives have bee n undertaken to facilitate trade. Among the initiatives put in place 
are: 
National Policy for Development and Implementation of Regulations (NPDIR)  WT/TPR/G/366 • Malaysia  
 
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  3.5.  In line with the National Policy for Development and Implementation of Regulations (NPDIR) 
which was launche d on July 2013, the Malaysia Productivity Corporation (MPC) continues to 
promote Good Regulatory Practices (GRP) at Federal, state and local authorities. More than 300 
Regulatory Coordinators (RCs) have been appointed from Ministries and government agencie s. 
Ministries and government agencies were given specific training and guidance to carry out the 
Regulatory Impact Assessment (RIA). The Organisation for Economic Cooperation and 
Development (OECD) has provided support, advice and technical assistance in i mplementing GRP 
at the federal level.  
3.6.  Starting in 2017, GRP has been introduced at selected states as well as local authorities to 
integrate and establish standardised, structured and systematic way of reviewing business 
regulations.  
Malaysia Productivit y Blueprint (MPB)  
3.7.  Productivity has been highlighted as a game changer in the 11MP to propel Malaysia to 
become a high income and inclusive nation. To achieve the labour productivity growth target of 
3.7% per annum under the 11MP, the Malaysia Productivity Blueprint (MPB) was launched by the 
Prime Minister on 8 May 2017 to provide a framework that will address productivity issues and 
challenges in a comprehensive and cohesive manner. It provides guided implementation to 
expedite productivity improvements as envisaged in the 11MP through five strategic thrusts as 
follows:  
i. Building Workforce of Future;  
ii. Driving Digitalisation and Innovation;  
iii. Making Industry Accountable for Productivity;  
iv. Forging a Robust Ecosystem; and  
v. Securing a Strong Implementation Mechanism.  
3.8.  Based on these strategic thrusts, ten national initiatives and sixteen key activities will drive 
nation -wide productivity improvement. MPC has been given the mandate to oversee thrust 4: 
Forging a Robust Ecosystem. Under this thrust, two initiatives to be  undertaken are:  
i. accelerating efforts to enhance whole -of-government approach towards addressing 
regulatory constraints; and  
ii. establishing an accountability mechanism for the implementation of regulatory 
reviews by the Government.  
3.9.  Under the Blueprint, six i mmediate priorities have been identified as game changers to move 
the needle on productivity improvement. The six immediate priorities are:  
i. Restructure and improve the management of foreign workers;  
ii. Actively encourage adoption of Industry 4.0 by companies,  across main economic 
sectors;  
iii. Strengthen digitalisation among SMEs through e -commerce and adoption of 
innovative technology;  
iv. Embed productivity targets for enterprises into disbursement processes of new 
grants, incentives and soft loans;  
v. Remove non -tariff measures that impede business growth and improve efficiency of 
the logistics sector; and  WT/TPR/G/366 • Malaysia  
 
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  vi. Evolve governance model to drive game changing implementation of Malaysia 
Productivity Blueprint.  
3.10.   Different processes and systems in export and import licensing, perm it and approval 
processes have been identified as a key barrier impeding productivity growth. As such, one of the 
priorities of the MPB is to address this issue by restructuring NTMs, including customs regulations, 
to ensure streamlined processes and regul ations for export and import permits and regulations. 
Among the reform activities are:  
i. accelerate implementation of a new Customs system;  
ii. introduce guillotine approach to reduce regulatory burden;  
iii. establish and institutionalise an innovation policy development engagement 
mechanism to embrace disruptive technology; and  
iv. accelerate implementation of the Logistics Masterplan.  
Further Liberalisation on Import Licence Requirement  
3.11.   As an on -going effort to facilitate trade, the Government continues to revie w the import 
licencing requirement. In this connection, the import licence requirement for motorhomes, 
motorcycle helmets, used tyres and flour was abolished effective 1 September 2016; and 181 tariff 
lines of iron and steel products effective 1 August 201 7. The implementation measure is gazetted 
in the Customs (Prohibition of Imports) (Amendment) Order 2016 and 2017.  
Customs Modernisation  
3.12.   Effectiveness and efficiency of customs administration and operation plays an important role 
in trade facilitation. The  Royal Malaysian Customs Department (RMCD) continues its efforts in 
capacity building of customs personnel. As an active member of the World Customs Organisation 
(WCO), Malaysia has acceded to the Revised Kyoto Convention, SAFE Framework of Standards and 
supported other WCO tools and instruments.  
3.13.   RMCD is currently developing an integrated Customs system that will replace the existing 
Customs Information System. The new system will enhance the facilitation of trade by allowing 
traders to submit all import, e xport and transit information required by regulatory agencies via a 
single electronic gateway.  
3.14.   Malaysia started its Authorised Economic Operator (AEO) programme in January 2010 and 
to date, 59 companies comprising importers, exporters and manufacturers hav e been accredited 
AEO status. Companies accredited under this programme enjoy customs facilitation, such as 
reduced inspection procedure and expediting clearance of cargoes at control points. As of October 
2017, Malaysia has entered into a Mutual Recogniti on Arrangement (MRA) with customs 
administration of Japan;  Hong Kong, China;  and Korea. Accredited companies will enjoy customs 
facilitation in those countries.  
Export Promotion Activities  
3.15.   Export promotion for Malaysia is led by Malaysian External Trade Development Corporation 
(MATRADE) including through its representation worldwide at 46 locations in major commercial 
cities. The activities remain focused on international trade fairs, trade missions, specialised 
marketing missions  and business -matching programmes. MATRADE is also actively involved in 
assisting foreign companies to source for suppliers of Malaysian products and services.  
3.16.   The Government has established the National Export Council (NEC) in December 2014 as a 
vehicle t o enhance and accelerate the nation's export growth and to advance Malaysia’s exports 
ecosystem to accommodate the development of local industries.  Briefly, NEC , which is chaired by 
the Prime Minister,  looks at improving the export eco -system by addressing  issues that  impede 
exports growth along the  value chain. These include the need to improve the infrastructure to WT/TPR/G/366 • Malaysia  
 
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  support trade, reduce unnecessary regulatory procedures, standards and certification, non-tariff 
barriers (NTBs) , market access, skilled talen t and access to financing.  
3.17.   Twelve national key export sectors are being focused, which include E&E, machinery & 
equipment, petrochemical, automotive parts & components, medical devices, palm oil, agro 
business, medical tourism, tourism, construction servi ces, ICT services and education. Initiatives 
undertaken are aimed at moving up the products value chain through enhancing downstream 
activities. In terms of promotion abroad, strategies include enhancing cohesiveness and better 
coordination among the vario us ministries and agencies with the aim of strengthening nation 
branding and maximising the outcomes.  
Promotion of Investments for Manufacturing and Services Sectors  
3.18.   Malaysia has adopted a more focused and targeted approach in attracting quality 
investment s in high technology, capital -intensive and knowledge intensive industries; high value -
added industries; R&D activities as well as in new growth areas. This is in line with the 
Government’s effort for Malaysia to be a high income nation by 2020. The focus is leveraging on 
the megatrends development to target products with technological advancements and new product 
applications.  
3.19.   Malaysian Investment Development Authority (MIDA) is focusing on promoting niche and 
more complex products in the manufacturing sec tor. This strategic initiative has identified three 
catalytic subsectors of E&E, Machinery and Equipment and Chemicals as well as the two growth 
subsectors of Aerospace and Medical Devices. These “3+2” catalytic and growth subsectors have 
also been identif ied to help increase export activities of local manufacturing companies. As for the 
services sector, the focus is in the areas of Principal Hubs, Logistics, e -Commerce, Green 
Technology and Renewable Energy as well as Waste Management.  
3.20.   MIDA’s function as t he Principal Investment Promotion Agency (IPA) starts from 
approaching investors, evaluating incentives, handholding investors in implementing their projects 
and initial implementation of investments to ensure the conditions are met. MIDA also provides 
continuous support to companies post their implementation period. Among the initiatives by MIDA 
include:  
i. fine-tuning its investment policies, as well as continuous collaboration and 
engagement with industry players and stakeholders to attract investors into a ll 
economic sectors;  
ii. organising working visits and Trade & Investment Missions to targeted countries to 
attract new investment opportunities;  
iii. direct c ooperatio n between MIDA and Agencies at federal and s tate levels in 
facilitating and attracting investment s; 
iv. Business Process Reeng ineering to  simplify approval process for import duty/sales 
tax approval; and  
v. establishment of the Incentive Coordination and Collaboration Office (ICCO) in MIDA.  
3.21.   In order to facilitate companies, MIDA has set up the Industry Advi sory Panels (IAPs) for 6 
Industries, namely E&E, machinery and equipment, chemical, aerospace, medical devices and 
pharmaceutical. This is in line with the objective of 11MP to move up these sectors into higher 
value chain.  
3.22.   As highlighted in the last Revie w, the Government has established five economic growth 
corridors to further develop Malaysia's strategic investments regions. The five economic regions 
and growth corridors are:  
i. Iskandar Malaysia (IM)  WT/TPR/G/366 • Malaysia  
 
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   Located in Johor, Iskandar Regional Development Authori ty (IRDA) was launched 
in 2006 under Iskandar Regional Development Authority Act 2007 (Act 664). To 
date, Iskandar Malaysia registered a total of RM  237.37 billion cumulative 
committed investments, of which RM  129.97 billion had been realised and 
729,310 j obs had been created in various economic sectors.  
ii. Northern Corridor Economic Region (NCER)  
 The Northern Corridor Implementation Authority (NCIA) was launched in 2007  
under the Northern Corridor Implementation Authority Act 2008 (Act 687) and is 
located in the northern Peninsular Malaysia. A new NCER Blueprint 2.0 had been 
launched in 2017, focusing on seven catalytic growth node projects, 28 
transcending border project s and 45 localised high -impact projects. To date,  
NCIA has achieved a total of RM  84.57 billion realised investment and created 
92,732 jobs in various economic sectors.  
iii. East Coast Economic Region (ECER)  
 The East Coast Economic Region Development Council (ECERDC) was launched in 
2007 under the East Coast Economic Region Development Council Act 2008 (Act 
688). It covers an area of 66,000 sq km, covering Kelantan, Terengganu, Pahang 
and the district of Mersi ng in Johor. The ECER development Masterplan focused 
on key initiatives related to tourism; oil, gas and petrochemical; modern 
agriculture; human capital; manufacturing; SME Development and Business. 
Some of the projects implemented during the 10MP are Rom pin Integrated 
Pineapple Plantation, and Empower ECER. To date, ECERDC has achieved a total 
of RM  104.28 billion cumulative committed investments, of which 
RM 41.17  billion had been realised and created 151,779 jobs in various economic 
sectors.  
iv. Sabah Devel opment Corridor (SDC)  
 Sabah Economic Development and Investment Authority (SEDIA) was launched 
in 2008 under the Sabah Economic Development and Investment Authority 
Enactment 2009. The key focus areas of SDC are agriculture, tourism, logistics 
and manufact uring; oil, gas and energy; higher education, and palm oil. To date, 
SEDIA has achieved a total of RM  162.96 billion cumulative committed 
investments, of which RM  62.33 billion had been realised and created 184,209 
jobs in various economic sectors.  
v. Sarawak  Corridor of Renewable Energy (SCORE)  
 Regional Corridor Development Authority (RECODA) was launched in 2008 under 
the Sarawak Regional Corridor Development Authorities Ordinance of 2006. It 
covers an area of 70,708 sq km of the central region of Sarawak. F ive growth 
nodes have been identified namely Samalaju, Mukah, Tanjung Manis, Tunoh and 
Baram with different priorities and activities. For example, Samalaju is targeted 
as the new heavy and energy -intensive industry centre and Mukah will be 
developed into a Smart City. Some of the completed projects by RECODA include 
66km of access road to Murum Hydroelectric Plant and Phase 1 of the Samalaju 
Industrial Park. To date,  RECODA has achieved a total of RM  115.79 billion 
cumulative committed investments, of whic h RM 81.90 billion had been realised 
and 59,645 jobs had been created in various economic sectors.  
3.23.   Promotion measures of all the Investment Promotion Agencies (IPAs) at the federal and 
state levels are closely coordinated by MIDA and are aligned with the G overnment’s overall 
development policy. Potential investors will be assisted through facilitation measures up to the 
implementation of the project. Post implementation concerns are also acted upon swiftly by MIDA 
together with the Ministries and relevant i nstitutions at the federal and state levels.  WT/TPR/G/366 • Malaysia  
 
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  3.24.   In addition, the Ministry of International Trade and Industry (MITI) together with MIDA and 
other relevant Ministries and government agencies, organise and co -organise regular activities 
such as roundtable meeti ngs and dialogue sessions with investors and industry chambers and 
associations to obtain updates on industries particularly issues and concerns faced by the 
businesses.  
3.25.   The Government will continue to introduce various measures to facilitate and sustain 
investments in the country. These measures will include fine -tuning its investment policies, 
enablers, fiscal and non -fiscal incentives, as well as continuously collaborating and engaging with 
industry players and stakeholders to attract investors in all e conomic sectors.  
Investment Committee  
3.26.   The Investment Committee (IC) was established to ensure better coordination in the area of 
investments among all arms of the Government and investment promotion agencies. Chaired by 
the Minister of International Trade and Industry, the IC also monitors and ensures that the 
objectives and targets of the Economic Transformation Programme (ETP) on economic growth of 
private investments is realised fully. The IC’s main functions are:  
i. to collect and collate data on investmen t; 
ii. to assess the investment gaps; and  
iii. to identify strategic issues and impediments to investments and address the se 
issues.  
SME Masterplan 2012 -2020 
3.27.   SMEs assume a pivotal role in promoting the stability and development of the nation by 
creating employment opportunities and fuelling economic process. SMEs account for 98.5% of the 
total 907,065 business establishments in Malaysia in 2016. The SME Masterplan (2012 –2020) 
continues to provide policy direction for SMEs development in Malaysia.  
3.28.   Empirical evidence indicated that six growth levers namely innovation and technology 
adoption, human capital, access to financing, market access, legal and regulatory environment as 
well as infrastructure contribute to the high performance of Malaysian SMEs. Challenges faced  in 
each of these areas that impede the performance of SMEs were also identified. The Masterplan 
proposed an Action Plan to address these challenges simultaneously. The Action Plan comprises six 
High Impact Programmes (HIPs) such as Integration on Business  Registration and Licensing (HIP 
1), Going Export Programme (HIP 4) and Catalyst Programme (HIP 5) and 26 other 
complementary initiatives which have been deliberated based on consultations with the private 
sector and further substantiated by evidence and b est practices in other countries.  
Table 3.2 6 HIPs of SME Masterplan  
HIP 1:  
Integration of Business 
Registration and Licensing  HIP 2:  
Technology Commercialization 
Platform (TCP)  HIP 3:  
SME Investment Partner (SIP)  
Create a single registration point 
through interfacing of the current 
National Business Registration 
System i.e. MyCoID and the 
National System Licensing System 
i.e. BLESS.  Establish a national network of 
privately -managed platform to 
promote innovative ideas from 
proof of concept to the 
commercialization stage.  Provide early stage financing 
through the establishment of 
investment companies to invest in 
potential SMEs in the form debt, 
equity or a hybrid of both.  
HIP 4:  
Going Export (GoEx) Pro gram HIP 5:  
Catalyst Program  HIP 6:  
Inclusive Innovation  
Offer customized assistance to new 
exporters and SMEs venturing into 
new markets. Export -ready SMEs 
can avail to comprehensive support 
assistance.  Create homegrown  champions 
through a targeted approach with 
support in the area of financing, 
market access and human capital 
development.  Empower the bottom 40% of the 
income group to leverage on 
innovation through the 
transformation of rural community 
through hand holdi ng approach  WT/TPR/G/366 • Malaysia  
 
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  3.29.   The Plan is progressing well with five out of six HIPs have begun benefiting SMEs. 
Preliminary implementation assessment of the HIPs undertaken by the World Bank showed that 
most of HIPs are at advanced stages of implementation.  
3.30.   The HIP 1 proj ect on ease of doing business towards creating a single gateway for business 
registration and licensing, is being rolled out in stages. An information portal, the MalaysiaBiz 
Portal, was officially launched by the Prime Minister on 23 June 2016 and can be publicly accessed. 
To date, a total of 2,918 licenses issued by 508 local authorities have been uploaded to the portal 
for 1,174 activities across all economic sectors.  
3.31.   Notably on innovation, since HIP 2 or the Technology Commercialisation Platform (TCP) 
began in May 2014, 125 projects have been approved for integrated assistance, 174 license deals 
have been signed and 22 innovations commercialized.  
3.32.   Meanwhile, 156 SMEs from 12 sectors have reaped the benefit of participating in the HIP 4 
managed by MATRADE , to internationalise export -ready SMEs. These companies have managed to 
achieve potential export sales contracts amounting to RM  57 million from 14 new countries 
explored.  
3.33.   The Green SSL/LED and BioNext Initiative under the Catalyst Programme (HIP 5) have been 
completed . Under the Green SSL/LED initiative, 38 products were Internationally Certified in 2016. 
The BioNext Initiative has also been completed with 10 participating companies in the Oxford 
Accelerator Programme implementing their individually desig ned action plans to bec ome high 
growth companies. These  BioNext segment was undertaken by SME Corp. Malaysia in collaboration 
with Malaysian Bioeconomy Development Corporation Sdn. Bhd. (Bioeconomy Corporation). For 
2017, the focus will be on creating high growth SMEs in aerospace, medical devices and rail 
industry.  
3.34.   For the bottom 40% of the income pyramid (B40), innovation is facilitated through the HIP 
6, which is implemented by Malaysian Foundation for Innovation , an agency under the Ministry of 
Science , Technology and Innovation (MOSTI). Since inception, the programme has shown positive 
progress with more than 1,200 innovations received . To date, 44 innovations have been shortlisted 
under the programme, of which 15 innovations are ready for diffusion, b enefiting 620 people in 12 
communities.  
3.35.   Meanwhile, the HIP 3 is a co -funding initiative between Government and private investors to 
enhance access to financing for early -stage SMEs. A total of RM  15 million seed capital has been 
allocated under the Progra mme which is expected to begin towards the end of 2017.  
3.36.   A total of 26 supporting initiatives to reinforce implementation of HIPs in achieving the 
Masterplan goals are being implemented with substantive progress in the areas of policy reforms, 
human capita l development and ease of doing business.  
3.37.   The ultimate goal of the Plan is to increase SME contribution to more than 40% of GDP, 
65% of employment and 23% of exports by 2020. In 2016, SMEs contributed 36.6% to GDP from 
slightly below 30% in  2005, while emp loyment share rose to 65.3% (2005: 56.8%) and exports to 
18.6% (2010: 16.4%).  
Draft National SME Development Bill 2016  
3.38.   Given the importance of SMEs in the economy, SME Corp. Malaysia is currently finalizing a 
specific Act to guide the SME industry. From th e various researches conducted, the countries with 
their own SME Act experienced tremendous development and growth of their SMEs. A framework 
for the Act was developed based on the situation and business environment in Malaysia.  
3.39.   The draft Bill aims to imp rove the approach to SME and entrepreneurship in Malaysia as well 
as simplify the regulatory and policy environment for SMEs. It covers six (6) key areas, namely, 
general guidelines, institutional framework, market access, special incentives such as standa rd 
payment terms and government procurement, SME funding and responsibilities of those parties 
involved in the proposed Act.   WT/TPR/G/366 • Malaysia  
 
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  Performance Management and Delivery Unit (PEMANDU)  
3.40.   In March 2017, the role of PEMANDU has been transitioned to the newly establis hed Civil 
Service Delivery Unit (CSDU) under the Economic Planning Unit. CSDU will continue to focus on 
the implementation of the initiatives under the National Transformation Programme.  
Malaysia Halal Council  
3.41.   In the move to further accelerate growth of th e halal industry in Malaysia and enhance 
Malaysia’s role in leading global halal industry development, the Government initiated the 
formation of the Malaysia Halal Council (MHC). The Council was established in June 2016 under the 
chairmanship of the Deputy  Prime Minister of Malaysia.  The Council acts as an “Advisor” to the 
Government on both religious and economic matters in relation to the halal industry within the 
following areas:  
i. formulation of policies related to halal;  
ii. monitoring the implementation o f policies, strategic directions and key program mes; 
and 
iii. matters pertaining to development and management of the halal industry.  
3.42.   Halal Industry Development Corporation (HDC), Department of Islamic Development 
Malaysia (JAKIM) and Department of Standards Malaysia are the co -secretariat for the Council. As 
the continuous strategic response to drive the development of Malaysia’s halal industry, Malaysia 
has develop the 1st Halal Industry Master Plan (HIMP) (2008 -2020). The objective of this Master 
Plan is to  make Malaysia as a global reference for Halal integrity know -how, innovation, production 
and trade of a number of Halal related sectors. The projected contribution of halal industry under 
the Plan is 8.7% to GDP and RM  50 billion exports by 2020. In 2016,  the Halal Industry 
contributed 7.5% to the country’s GDP.  
National Logistics and Trade Facilitation Masterplan (NLTF)  
3.43.   The Economic Planning Unit (EPU) has formulated the Logistics and Trade Facilitation 
Masterplan (NLTF) to provide the strategic framework  and roadmap to elevate Malaysia to be the 
“Preferred Logistics Gateway to Asia” by 2020 and beyond. A total of 21 action plans for the 
strategic direction is to be implemented to improve overall productivity to better connect industries 
with their markets , both locally and internationally. These action plans are well planned to 
overcome barriers in the industry, stimulating domestic economic development and strengthen 
Malaysia’s position in the Asian region.  
3.44.   Under the Logistics and Trade Facilitation Maste rplan, MITI together with the Ministry of 
Transport (MOT), aims to reduce time and cost in enhancing inland transportation efficiency, 
improving last -mile connectivity at Port Kelang and addressing bottlenecks at the Padang Besar 
Terminal. The action items  are in tandem with the new methodology introduced in Trading Across 
Borders by the World Bank Doing Business and are targeted to improve Malaysia’s Trading Across 
Borders performance.  
3.45.   The implementation of the action items under the Masterplan spans beyon d 2020, with 
focus on reducing bottlenecks; enhancing domestic growth; and creating regional footprints.   
3.3  Multilateral Trading System  
3.46.   Malaysia has been an active Member of the WTO and also participated in various 
international organisations and forums. In  WTO, Malaysia has been involved at various levels in 
several bodies and committee meetings. Malaysia was the Chairperson to the Trade Policy Review 
Body in 2014 and the Preparatory Committee on Trade Facilitation. Malaysia participated in the 
Tenth WTO Mi nisterial Conference (MC10) in Nairobi, Kenya in 2015. On 26 May 2015, Malaysia 
became the fifth member to ratify the Trade Facilitation Agreement (TFA). Malaysia ratified the 
Protocol Amending the TRIPS Agreement on 10 December 2015.  WT/TPR/G/366 • Malaysia  
 
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  3.47.   Over the past years, Malaysia has been involved as a third party in several trade dispute 
settlement cases that have a bearing on Malaysia’s trade interests. These include packaging 
requirement for tobacco products, anti -dumping measures on bio -diesel and fatty alcohol, and 
incentives on solar cells and modules.  
3.48.   Malaysia is also involved actively in other multilateral organizations and forums such as 
OECD, World Economic Forum (WEF), World Islamic Economic Forum (WIEF), Indian Ocean Rim 
Association (IORA), Commonwealth and Wor ld Bank. Malaysia hosted the 25th WEF on ASEAN on 
1-2 June 2016.  
3.49.   Malaysia together with 23 other WTO members had adopted the ‘Ministerial Declaration on 
the Expansion of Trade in Information Technology Products (ITA2)’ on 16 December 2015. 
Malaysia’s comm itment for the 201 products covers 410 affected tariff lines (9 digit), which 351 
lines (86%) are already at zero duty (nil import duty). The remaining 59 tariff lines have current 
applied duties ranging from 5% to 30% which will be progressively removed w ithin three to seven 
years.  
Implementation of Commitment in Trade Facilitation Agreement (TFA)  
3.50.   Malaysia notified its list of Category A to the WTO on 22 July 2014 and officially accepted 
the Protocol on 26 May 2015, being the 5th WTO Member to do so. Malay sia has placed all 
provisions under Category A except for two provisions namely Article 7.8 on Expedited Shipment 
and Article 11.9 on Advance Filing and Processing of Transit Documentation.  
3.51.   Malaysia has established the Trade Facilitation Cluster Working Gr oup (TFCWG) in 2015, 
which assumes the role of the National Committee on Trade Facilitation, to monitor the domestic 
implementation of the WTO TFA. The TFCWG is co -chaired by MITI and RMCD. The Working Group 
comprises members from the Government and the pr ivate sector to discuss issues related to cargo 
clearance system, paperless trading and security of trade documents, to boost trading activities 
and reduce cost of doing business, and monitors Malaysia’s commitments under the WTO TFA as 
well as other inter national fora.  
3.52.   Among improvements made by Malaysia in compliance to WTO TFA include:  
i. Establishing the Malaysia National Trade Repository (MNTR) in October 2015  to 
ensure availability of information and publication (Article 1); and  
ii. Introducing GRP in publi c sector  to provide a platform  for stakeholders to comment 
before any laws  and regulations or any review to Government’s policies take place 
(Article 2).  
3.53.   Based on the WEF’s Global Enabling Trade Report 2016, Malaysia was ranked 37th out of 
136 countries, i n terms of its capacity to facilitate the flow of goods over borders and to their 
destination. Most of the economies in the top 30 rankings comprise advanced countries, while 
among the ASEAN Member States (AMS), Malaysia was ranked second.  
3.54.   The implementati on of the WTO TFA will expedite the movement and clearance of goods 
across border through the improvement in Customs procedures. This will further enhance 
Malaysia’s competitiveness as a trading nation.  
3.4  Development in FTAs  
Bilateral Agreements  
3.55.   Since the last review, Malaysia has signed the Malaysia -Turkey Free Trade Agreement 
(MTFTA) on 17 April 2014. The FTA, which came into force on 1 August 2015, outlines 
commitments from both countries on liberalization of trade in goods. Malaysia was able t o lock -in 
tariff preferences that were either on par with, or better than, those previously granted under 
Turkey’s Generalised System of Preferences (GSP), which were no longer available for Malaysia, 
beginning 1 January 2014.  As such, with the signing an d subsequent entry into force of MTFTA, 
Malaysian exporters can continue to gain preferential market access into and also remain WT/TPR/G/366 • Malaysia  
 
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  competitive in the Turkish market. Turkey will eliminate duties on 85.89% of tariff lines. Malaysia's 
commitment involves tarif f reduction/elimination on 98.86% from the total tariff lines. The FTA will 
be realised over a period of 8 years.   
3.56.   The Malaysia -European Union Free Trade Agreement (MEUFTA) negotiation was formally 
launched on 5 October 2010. It is a comprehensive FTA cov ering 16 areas which include market 
access for goods, services, investment, competition policy, intellectual property rights, government 
procurement as well as sustainable development issues covering labour and environment. In 2012, 
the MEUFTA negotiations  were suspended. There is now renewed political will to exercise flexibility 
in addressing the challenges and outstanding issues faced in the negotiations.   
3.57.   The negotiations on Economic Partnership Agreement between Malaysia and European Free 
Trade Area ( MEEPA) commenced in March 2014. The scope of the negotiation is broad based 
covering several areas including trade in goods, services, investment, rules of origin and trade 
facilitation. To date, 8 rounds of negotiations have been held.  
Regional Trade Agr eements  
3.58.   ASEAN continues to feature prominently in Malaysia’s regional trade environment. The 
creation of the ASEAN Free Trade Area (AFTA), which was agreed at the 1992 ASEAN Summit, is 
to leverage on the huge potentials and complementarities that exist in the region in order to 
strengthen and deepen intra -ASEAN linkages. The primary mechanism for achieving the goals of 
AFTA is the Common Effective Preferential Tariff (CEPT) Scheme. The CEPT Scheme has been 
superseded by the ASEAN Trade in Goods Agreement (A TIGA) which entered into force on 17 May 
2010.  
3.59.   The ATIGA value -adds to the CEPT Scheme in terms of inclusion of disciplines. The ATIGA 
comprises several new elements to ensure the realisation of free flow of goods within ASEAN, 
including tariff liberalisa tion, removal of non -tariff barriers, rules of origin, trade facilitation, 
customs, standards and conformance, and sanitary and phytosanitary measures. The objective of 
ATIGA is to be on par with key principles of the Trade in Goods (TIG) Agreements with A SEAN’s 
Dialogue Partners.  
3.60.   Besides strengthening ASEAN internal integration, ASEAN has also been actively engaging 
with all its dialogue partners, namely Australia, China, the EU, India, Japan, Korea, New Zealand, 
Russia and the US.  
3.61.   Over the recent years, ASEAN has reviewed its on -going regional FTAs. For ASEAN -China 
FTA (ACFTA), the Protocol to Amend the Framework Agreement on Comprehensive Economic Co -
Operation between ASEAN and China was signed on 22 November 2015 at the 27th ASEAN  
Summit. The upgrading of the ACFTA aims to further streamline and enhance economic 
cooperation, including amendments to the agreement on Trade in Goods, Services, Investment 
and Economic and Technical Cooperation.  
3.62.   As for ASEAN -Korea FTA, the Third Protoc ol to Amend the ASEAN -Korea Trade in Goods 
Agreement introduced new commitments on Customs Procedures and Trade Facilitation, and 
provided legal effect to the inclusion of the Parties’ line -by-line Tariff Reduction Schedules to the 
Agreement. The Third Pro tocol has been signed by all Parties on 22 November 2015. To date, 7 
Parties have ratified the Protocol i.e. Korea, Lao PDR, Malaysia, Myanmar, Philippines, Singapore 
and Thailand.   
3.63.   Following the signing by all Parties in 2014, the ASEAN and India Service s Agreement and 
ASEAN India Investment Agreement entered into force on 1 July 2015. The ASEAN -India Trade in 
Services Agreement has been ratified by India and eight AMS, except for Cambodia and Indonesia. 
The ASEAN -India Investment Agreement has been ratif ied by India and seven AMS, except for 
Cambodia, Indonesia, and Lao PDR.  
3.64.   The negotiations on the ASEAN -Japan Services and Investments chapters for incorporation 
into the ASEAN -Japan Comprehensive Economic Partnership Agreement have been completed and 
expec ted to be signed by end of 2017.  WT/TPR/G/366 • Malaysia  
 
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  3.65.   In March 2017, during the 15th AEM -EU Trade Commissioner Consultations, Ministers have 
tasked the Senior Economic Officials to work out the parameters of a future ASEAN -EU FTA and to 
report back to the next Ministerial meet ing in 2018 under the Singapore chairmanship.  
3.66.   ASEAN and Russia marked the 20th anniversary of their dialogue relations in 2016 with a 
Commemorative Summit held in Sochi, Russia on 19 -20 May 2016. Russia had put forward a 
proposal to launch a joint feasibil ity study of a comprehensive free trade area between ASEAN and 
the Eurasian Economic Union (EAEU). At present, both Parties have agreed on the need to increase 
familiarisation of how ASEAN and EAEU operate before deciding on whether to embark on a 
feasibil ity study. In moving forward, in June 2017, Russia has submitted a non -paper on the 
EAEU’s Guiding Principles on Starting the Negotiations on Concluding Free Trade Agreements with 
Third Countries.  
3.67.   On 21 November 2015, the ASEAN -US dialogue relation was ele vated to a strategic level 
with the adoption of the Joint Statement on the ASEAN -US Strategic Partnership. The goals and 
vision of this Strategic Partnership is implemented through the Plan of Action to Implement the 
ASEAN -US Strategic Partnership (2016 -2020).  
3.68.   The first standalone US –ASEAN Summit was held at Sunnylands in Rancho Mirage, 
California on 15 -16 February 2016. The theme of the Summit was “Promoting an Innovative, 
Entrepreneurial ASEAN Economic Community”. During the summit, two initiatives were announced, 
namely US -ASEAN Connect and the US -ASEAN Trade Workshops.  The US -ASEAN Connect will 
provide opportunities for ASEAN and the US to stay connected through better access to expertise, 
information and resources of the US government and private sect or in four areas i.e. Business 
Connect, Energy Connect, Innovation Connect, and Policy Connect. On the other hand, the US -
ASEAN Trade Workshops is to help better understanding among ASEAN countries on the 
commitments of high standard trade agreements.  
3.69.   In addition to the Summit, the 3rd ASEAN Economic Ministers Meeting (AEM) Roadshow was 
held back -to-back with the Summit in Sunnylands, California on 17 –18 February 2016. Focusing 
on innovation and entrepreneurship, the Roadshow further strengthened ASEAN -US connections 
and generated increased awareness of the presence of ASEAN as a region and a vital trading 
partner of the US.  
3.70.   Several other initiatives have also been implemented under 2016 -2017 ASEAN -U.S. Trade 
and Investment Framework Arrangement (TIFA) and Expanded Economic Engagement (E3) 
Initiatives Work Plan. These include the:  
i. finalization and endorsement of the texts of the ASEAN -U.S. Cooperation in Fostering 
Transparency and Good Regulatory Practices and the ASEAN -U.S. Cooperation in 
Fostering Interna tional Investment; and  
ii. ASEAN -U.S. Trade and Environment Dialogue focusing on Combating Illegal, 
Unreported and Unregulated Fishing, which was held on 5 –6 November 2015 in 
Kuala Lumpur, Malaysia.  
3.71.   ASEAN and the U.S. are currently working on the finalization  of the ASEAN -US Cooperation 
in Fostering Cooperation in Telecommunications and Information Technology Services and to also 
organize a workshop on illegal wildlife trafficking in 2017.  
3.72.   ASEAN and its six dialogue partners (Australia, China, India, Japan, Ko rea and 
New Zealand) launched the Regional Comprehensive Economic Partnership (RCEP) negotiations in 
2013. The objective of RCEP is to streamline the 6 ASEAN FTAs with its dialogue partners into a 
single regional trade agreement that can contribute to stre ngthening regional value chain in the 
region. To date, 20 Rounds of RCEP negotiations have been held since May 2013. The 20th Round 
was held from 21 -28 October 2017 in Korea.  
3.73.   The scope of RCEP is comprehensive and covers:  
i. Trade in Goods;  WT/TPR/G/366 • Malaysia  
 
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  ii. Trade in Services;  
iii. Investments;  
iv. Economic and Technical Cooperation;  
v. Intellectual property;  
vi. Competition Policy;  
vii. Dispute Settlements;  
viii. Electronic Commerce; and  
ix. Small and Medium Enterprises.  
3.74.   Two RCEP Chapters namely Economic and Technical Cooperation and Small and Medium 
Enter prises have been finalised and are currently undergoing legal scrubbing.  
3.75.   The ASEAN -Hong Kong, China Free Trade Agreement (AHKFTA) and the ASEAN -Hong Kong, 
China Investment Agreement (AHKIA) was successfully concluded on 30 -31 July 2017. This would 
enable b oth agreements to be signed by the Ministers at the sideline of the 31st ASEAN Summit in 
November 2017 in The Philippines.  
3.76.   Malaysia is among the 12 negotiating countries involved in the Trans -Pacific Partnership 
(TPP) negotiations. The other 11 countries a re Australia, Brunei Darussalam, Canada, Chile, Japan, 
Mexico, New Zealand, Peru, Singapore, United States and Viet Nam.  
3.77.   Signed by the 12 countries on 4 February 2016 in Auckland, New Zealand, the Agreement 
has yet to enter into force following the United States withdrawal on 23 January 2017. Currently, 
the remaining 11 TPP countries are engaging on a possible way forward to  bring the Agreement 
into force.  
3.5  ASEAN  
ASEAN Economic Community (AEC)  
3.78.   Economic integration is an on -going process for Malaysia and the other ASEAN Member 
States. The AEC established in 2015 is the beginning of this process. The ASEAN Economic 
Blueprint 20 25 was then adopted in which it outlines the measures that will be implemented over 
the next ten years to create a highly integrated and cohesive, competitive and dynamic ASEAN. 
Under the new Blueprint, growth and the dynamism of ASEAN as an economic entit y is expected to 
be generated or sustained through robust productivity growth, innovation, leveraging on 
information, communication technology, adjusting to industry 4.0 technologies, human resources 
development and strengthening ASEAN’s global economic en gagement.  
3.79.   The key challenges faced in implementing the AEC Blueprint 2025 measures are the timely 
ratification of ASEAN agreements/protocols which affect their entry into force, alignment of 
regional initiatives to domestic laws and regulations and domesti c constraints in the 
implementation of regional and country -specific commitments.  
3.80.   In the next decade, Malaysia and ASEAN will continue to provide emphasis on the 
development and promotion of micro, small and medium enterprises (MSMEs) in economic 
integrati on efforts. At the same time, Malaysia and ASEAN will likewise embrace the evolving 
digital technology as leverage to enhance trade and investments, provide an e -based business 
platform, promote good governance, and facilitate the use of green technology.  
3.81.   ASEAN is in the right direction in pursuing deeper economic integration. However, the 
elimination of tariffs alone is not sufficient. Malaysia has emphasised that apart from implementing 
action lines under the AEC Blueprint 2025, priority must be given to address NTBs which continue WT/TPR/G/366 • Malaysia  
 
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  to impede intra -ASEAN trade and investment. The reactivation of ASEAN Trade Facilitation Joint 
Consultative Committee (ATF -JCC) in 2015 was one of the initiatives taken by Malaysia to address 
the NTBs. The ATF -JCC will work with  private sector in identifying, reducing and eliminating the 
NTBs.  
3.82.   The 32nd High Level Task Force on Economic Integration (HLTF -EI) agreed with Malaysia’s 
recommendation for a possible framework which clearly identifies actions to be taken by ASEAN 
member states to monitor, reduce and ultimately eliminate NTMs/NTBs that continue to impede 
the expansion of intra -regional trade and investment under the AEC. The four key proposals are 
to: 
i. develop clear guidelines in categorising NTMs as NTBs;  
ii. fully implement a ll commitments stipulated in Article 11 (Notification Procedures), 
Article 12 (Publication and Administration of Trade Regulations), Article 40 
(Application of NTMs), and Article 42 (Elimination of other NTBs) under ATIGA;  
iii. develop a mechanism for counter n otification procedures under ATIGA, i.e. an AMS 
may notify introduction of new NTMs/NTBs by another AMS; and  
iv. improve the system for engaging the private sector in identifying NTBs.  
3.83.   Besides removing NTBs related to trade in goods, ASEAN is also working towa rds removing 
barriers and restrictions in trade in services. This liberalisation initiative is undertaken 
progressively under the ASEAN Framework Agreement in Services (AFAS) in ten packages starting 
from the First Package in 1995. The liberalisation cover s 128 services sub -sectors, which include 
air transport, financial services, transport and logistics, business sector, construction, tourism, 
recreational facilities, hotels theme parks, restaurants, retail and wholesale distributive trade, 
healthcare, pri vate hospitals and medical care and consulting services.  
3.84.   To date, 9 Packages of Commitments under AFAS have been concluded, the latest of which 
was signed on 27 November 2015 in the Philippines. In this package, AMS have made 
commitments to liberalise a w ide range of services sector and subsectors. Malaysia’s offers in the 
9th Package cover a total of 101 services sub -sectors: healthcare, tourism and travel related 
services, computer and related services, telecommunication, business and professional servic es, 
distribution services, construction and related services, maritime transport and education. In 
addition, ASEAN has also signed 7 mutual recognition arrangements in engineering, accountancy, 
architect, surveying, dental, nursing and medical care to comp lement the liberalisation initiative by 
further facilitating the movement of professionals in the services sector.  
3.85.   The ASEAN Single Window (ASW) is a regional initiative that connects and integrates 
National Single Windows (NSWs) of ASEAN Member States. AS W provides the secure IT 
architecture and legal framework that will allow trade, transport, and commercial data to be 
exchanged electronically among Government agencies or the trading community. The ASW 
currently supports the exchange of the intra -ASEAN Ce rtificate of Origin ATIGA Form D among the 
exchange -ready Participating Member States. The live implementation of the ASW is targeted to be 
operationalized in 2018.  
3.86.   ASEAN is also pursuing a work programme on GRP. The ASEAN Work Plan on GRP 2016 -
2025 is aim ed at:  
i. institutionalising a body to work on GRP;  
ii. developing ASEAN GRP core principles; and  
iii. conducting a baseline study on Regulatory Management Systems (RMS) in ASEAN.  
3.6  Asia Pacific Economic Cooperation  
3.87.   Malaysia participates actively at the Asia Pacific Ec onomic Cooperation (APEC) and 
collaborates with APEC economies to achieve free and open trade and investment in line with the WT/TPR/G/366 • Malaysia  
 
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  Bogor Goals. Malaysia has contributed to APEC’s initiatives to advance regional economic 
integration in the areas of GRP, trade fa cilitation and internalization and integration of SMEs into 
GVCs.  
3.88.   During the review period of 2014 to 2017, Malaysia notably supported APEC initiatives by 
fulfilling commitments to eliminate or reduce duties to 5% on 54 products under the APEC 
Environment al Goods List, which came into effect on 1st January 2016. Malaysia also co -led a 
regional integration project focused on integrating SME automotive suppliers into the Original 
Equipment Manufacturers (OEM) GVCs. In the same vein, Malaysia also contributed  to the SME 
Online -2-Offline (O2O) business model, which aims to facilitate growth of SMEs and facilitate 
integration and internationalisation of SMEs into GVCs.  
3.89.   Malaysia also initiated the MyAPEC YouthConnect Programme in October 2016, which aims 
to nurtu re Malaysia’s and APEC’s talents through leveraging the integration of economies in the 
Asia-Pacific region. To date, 28 youths have  participated in the programme. In addition, Malaysia 
also assumed an active role in the pathways to the Free Trade Area of the Asia Pacific (FTAAP) and 
contributed to the Collective Strategic Study on Issues Related to the Realisation of FTAAP.   
4  CHALLENGES AND OPPOR TUNITIES OF EXTERNAL  ENVIRONMENT  
4.1  Overview  
4.1.  There are concerns that the global economic growth, including for deve loping countries like 
Malaysia will be affected by major policy decisions made by other countries. These include BREXIT, 
the new US trade policy, the uncertainty of the TPP, the structural changes introduced by China 
and the volatility of oil prices. Never theless, Malaysia’s trade in 2016 remained resilient despite 
continued uncertainties in the global environment. As a highly open economy with diversified 
exports and markets, Malaysia’s trade structure has partially mitigated the adverse effects arising 
from policy developments in some of the major export partners.  
4.2.  The Government is also responding to these global dynamics through advancing structural 
reform measures that promote trade and investment diversification and competitiveness, as well 
as moving up the value chain of industries. The Government continues to adopt the necessary 
policy responses to ensure Malaysia’s exports are not being discriminated, and compete at a level 
playing field, while continuing to maintain conducive environment for trade and investment. 
Malaysia firmly believes that a free, fair and predictable trade environment is vital for its 
participation in international trade activities.  
4.2  BREXIT  
4.3.  The impact of BREXIT on Malaysia’s trade and investment is still uncertain given the early  
stages of negotiations between London and Brussels. In addition, given that the UK has only 
recently started discussing its commitments under the WTO, it is still not clear how BREXIT will 
impact Malaysia. Indeed, from our preliminary consultations with t he business community, 
generally the  sentiment is quite positive.  
4.4.  Malaysia’s trade with the UK stood at US$3.7 billion in 2016. For the period January -August 
2017, Malaysia’s trade with the UK increased by 8.3% from the corresponding period of 2016. In 
2016, among the EU countries, the UK was Malaysia’s third largest trading partner and third 
largest source of investment.  
4.5.  BREXIT could also provide opportunities for Malaysia. Malaysia could be an investment 
attraction point for the UK in some high value ad ded, technological oriented and services sectors. 
In 2016, FDI from the UK to Malaysia was RM  5.2 billion (US$1.25 billion), while FDI from Malaysia 
to the UK was registered at RM  3.3 billion (US$0.8 billion).  
4.6.  There are also higher chances of the UK to hav e more targeted bilateral trade arrangements 
with Asian economies, including Malaysia. The UK businesses may also explore new opportunities 
in a more competitive and business -friendly environment like Malaysia which could serve as the 
gateway to expand the ir business within ASEAN. Notwithstanding the outcomes of BREXIT, 
Malaysia will continue to enhance its regional engagements with the EU and foster bilateral WT/TPR/G/366 • Malaysia  
 
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  relationship with the UK towards providing a transparent and liberal trade and investment 
environm ent for mutual benefit.  
4.3  U.S. Trade Policies  
4.7.  Malaysia and the U.S. have long enjoyed a favourable and successful partnership in trade and 
investment. The U.S. is among Malaysia’s top three trading partners, while Malaysia is among the 
top 20 trading partner s for the U.S. However, currently there is still a lack of clarity on US’ trade 
and investment policies towards ASEAN, including Malaysia.  
4.8.  The ‘America First’ policy introduced by the U.S. is a major concern for a small trading nation 
like Malaysia. In add ition, the U.S. new tax reforms may also impact the business decisions of 
multinational companies who have established strategic regional operations in Malaysia.  
4.9.  Nevertheless, Malaysia is committed to promoting a transparent and liberal trade and 
investme nt environment, especially within the rules -based multilateral trading system of the WTO.  
Malaysia looks forward to establishing a structured, and fair trade and investment partnership with 
the U.S. by building upon existing bilateral, regional and multil ateral platforms such as the Trade 
and Investment Framework Agreement (TIFA), APEC and WTO.  
4.4  Belt and Road Initiative  
4.10.   Malaysia and China enjoy a long history of partnership in various fields.  In 2016, China was 
Malaysia’s second major export country with t otal exports worth RM  98.56 billion 
(US$23.72  billion). For the period January to July 2017, Malaysia’s trade with China expanded by 
27.7% to RM  163.0 billion compared with the corresponding period of 2016. Exports to China 
surged by 39.4% to RM  69.2 billi on, due to higher exports of E&E products, petroleum products, 
rubber products, chemicals and chemical products as well as LNG. Imports from China increased 
by 20.3% to RM  93.9 billion.1 
4.11.   To further enhance Malaysia’s partnership with China, on 13 May 2017,  Malaysia signed an 
‘MoU on Promoting Mutual Economic Development Through the Silk Road Economic Belt and the 
21st Century Maritime Silk Road Initiative’ (OBOR MoU). The MoU outlined areas of cooperation 
such as facilities connectivity, cross -border e -comm erce, information connectivity, quality 
investments and encouraging utilization of local supply chain and other areas. The OBOR MoU is 
expected to create and expand business opportunities for the countries along the 21st Century 
Maritime Silk Road and Silk  Road Economic Belt.  
4.5  EU’s Resolution on Palm Oil and Deforestation of Rainforest  
4.12.   On 4 April 2017, the European Parliament adopted the Resolution on Palm Oil and 
Deforestation of Rainforest as a move to introduce minimum sustainability criteria for palm oil  and 
palm oil -based products that enter the EU market. According to the EU, this is to ensure that palm 
oil imported into the EU has not led to deforestation and not given rise to economic, social and 
environment problems and conflicts, such as child and f orced labour. To achieve this, various 
measures were proposed by the EU, including the ban of palm oil in biofuels, switching to a single 
EU-wide sustainability certification, introduction of discriminative tariffs between certified and 
sustainable palm oi l (CSPO) and non -CSPO and allowing only sustainable certified palm oil to be 
imported into the EU after 2020. The EU explained this is part of their commitments in various 
international sustainable -related agreements, such as the Paris Agreement and the 20 30 Agenda 
on Sustainable Development.  
4.13.   The EU is the third largest market for palm oil, while Malaysia is one the largest producers 
and exporters of palm oil products in the world. The EU Resolution is seen as discriminatory to 
palm oil and would result in  NTBs that have adverse impact on Malaysia’s palm oil exports to the 
EU. As part of Malaysia’s commitment to sustainable oil palm cultivation, the Malaysian 
Sustainable Palm Oil (MSPO) Scheme on a voluntary basis has been implemented since January 
2015. MS PO has been developed based on domestic laws and regulations, and best practices on 
                                                
1 Malaysia External Trade Statistics: Trade Performance for the Month of July 2017 and the Period of 
January -July 2017 .  WT/TPR/G/366 • Malaysia  
 
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  sustainability. To support MSPO implementation, the Malaysian Palm Oil Certification Council was 
also established in 2014. To promote certified sustainable palm oil and fur ther strengthen the 
image of the palm oil industry, in 2017, the Government announced the mandatory 
implementation of MSPO certification to nationwide palm oil producers and processors by 31 
December 2019.  
4.14.   Other initiatives include a joint seminar by the F riends of Palm Oil (FPO), namely Malaysia, 
Indonesia, Thailand, Colombia, Guatemala, Ecuador, Costa Rica and Honduras on “Sustainability 
and NTBs to Trade – The case study of palm oil” held on 26 September 2017 on the side -lines of 
the WTO Public Forum. Th e session involving presentations by nine panellists from the 
Government and private sectors, as well as non -governmental organisations (NGOs), was held to 
negate and correct the negative perception on palm oil based on factual and scientific evidence, 
showcase respective Governments’ initiatives towards various sustainability criteria, as well as 
challenges faced by FPO due to unjustified NTBs imposed by some WTO members.  
5  SECTORAL POLICIES  
5.1  Manufacturing Sector  
5.1.  The manufacturing sector continued to be the  mainstay of Malaysia’s economy during the 
period under review amid headwinds and uncertainties in the global economic landscape. The 
manufacturing sector accounted for 82.2% of the country’s total export and 23% of the country’s 
GDP in 2016, recording a s teady growth of 4.4%.2 Total workforce in the manufacturing sector 
grew by 2.7% to approximately 1,051,923 persons as of May 2017.  
5.2.  Under the 11MP, Malaysia aims to energise the manufacturing sector in order to sustain 
Malaysia’s resilience and long -term co mpetitiveness, and contribute to leading -edge, high -paying 
job opportunities for Malaysians. The manufacturing sector is expected to grow at 5.1% annually 
to the year 2020, contributing 22.1% or RM1.4 trillion to GDP, and accounting for 2.8 million jobs 
to 18.2% of total employment.3 
5.3.  The transition of the manufacturing sector towards creating a more high -value, diverse and 
complex products will be driven by E&E, machinery and equipment, chemicals, medical devices 
and aerospace sub -sectors. These industries were identified due to their cross cutting linkages with 
all economic segments such as the primary, manufacturing and services sectors. Increasing efforts 
are being undertaken to make Malaysia the leading hub for high technology products and activities 
in the region.  
5.4.  Among major initiatives to develop the E&E subsector is the implementation of the tariff 
elimination commitment of the ITA2 on 1 July 2016. With this, Malaysia’s ICT industry will have 
easier access to a wider market globally for its products a nd will provide market opportunities for 
more than 600 local producers to boost their exports to participating countries.  
5.5.  In 2017, the largest growth in the E&E sub -sector is expected to come from memory and 
sensors. Malaysia is poised to reap the benefit s of a rise in global demand for electronic products. 
However, the immediate need is to implement targeted strategies to close the gap in the E&E eco -
system. It is noted that the sub -sector continues to face tough challenges such as securing 
adequate talen t with the right skill sets for the supply, research, design and development aspect of 
the industry. Another challenge is to ensure that regulatory policies enforced are conducive to 
promoting business. With the advent of the Internet of Things (IoT) and I ndustry 4.0, this sub -
sector will continue to evolve and drive innovations in other areas such as automotive, aerospace 
and medical devices.  
5.6.   The Government is also undertaking steps to further develop the Aerospace industry in 
Malaysia. To ensure a stead y and consistent growth of the Aerospace industry, in 2015 the 
government launched the Malaysian Aerospace Industry Blueprint 2030. The Blueprint lined up 
strategies and key initiatives to enable the industry to become a robust high technology sector 
that supports the comprehensive aero -systems life cycle, taking advantage of the rapidly growing 
                                                
2 MITI Report 2016 .  
3 Eleventh Malaysia Plan 2016 -2020.  WT/TPR/G/366 • Malaysia  
 
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  air transportation industry. It is made up of five subsectors, namely aerospace manufacturing; 
Maintenance Repair & Overhaul (MRO); Engineering & Design; Systems In tegration and Training & 
Education with clear objectives and targets.  
5.7.  To spearhead the coordinated development of the aerospace industry, MITI established the 
National Aerospace Industry Coordinating Office (NAICO) in August 2015. NAICO assumed a 
critical role as the focal point for linking aerospace industry enterprises, relevant 
Ministries/Agencies and academia to collectively work to boost the capability and capacity of 
Malaysia’s aerospace industry. NAICO’s initiatives included the Aerospace Industry Co llaboration 
Programme (ICP) Strategy which would be the strategic reference for future aerospace ICP 
projects. NAICO also collaborated with TalentCorp Malaysia to develop a Critical Occupation List 
(COL) for the aerospace industry, which would serve as a s trategic reference for human capital 
development programmes for the aerospace industry.4 
5.2  Agriculture Sector  
5.8.  The agriculture sector remains as an important sector to Malaysia’s economic development, 
particularly in providing employment to the rural communi ty and towards achieving the national 
food security objectives. Agriculture also assumes an important role in the Government’s effort to 
uplift rural incomes and eradicate poverty.  
5.9.  Palm oil contributes to more than 40% of the country’s GDP in the agriculture sector for the 
past few years. In 2016, Malaysia was also ranked the second largest palm oil exporter in the 
world. Apart from palm oil, contributions of other agriculture sectors are relatively small, due to 
the fact that most of these sectors  consist of small -scale farmers and lack of large, industrial -scale 
companies.  
5.10.   Exports of commodity and commodity -based products grew by RM  4.9 billion or 4.19% to 
RM 122 billion in 2016. The higher exports were contributed by increased exports of palm oil  and 
palm-based products, timber and timber -based products as well as cocoa and cocoa -based 
products.   
5.11.   As reported in the previous review, Malaysia has identified the agriculture sector as one of 
the National Key Economic Areas (NKEA) under the ETP. Under  this programme, the Government 
is now focusing on the transformation of the agriculture sector from fragmented and small -scale 
farms to an integrated and market -centric model by capitalizing on Malaysia’s competitive 
advantages, tapping on premium markets , aligning food security objectives with increasing GNI 
and participating in the regional agricultural value chain by 2020.  
5.12.   To complement the implementation of the ETP, the Government is also currently 
implementing the 10 year National Agrofood Policy (NA P) which was launched in 2012, with the 
aim to further improve the competitiveness of the agro -food industry along its value chain and to 
create a more productive and knowledge intensive industry. There are seven strategies outlined 
under the NAP, as follo ws: 
i. ensuring national food security;  
ii. increasing the contribution of the agro food industry;  
iii. completing the value chain;  
iv. empowering human capital;  
v. strengthening the activities of R&D, innovation and the use of technology;  
vi. creating the environment for privat e sector led businesses; and  
vii. strengthening the delivery system.  
                                                
4 MITI Report 2016 .  WT/TPR/G/366 • Malaysia  
 
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  5.13.   The NAP also emphasised on food safety and nutrition by implementing Malaysian Good 
Agricultural Practices (MyGAP). This implementation will be gradually expanded to all Permanent 
Food Product ion Parks and Aquaculture Industrial Zone before extending to other commercial 
farms.  
5.3  Services Sector  
Autonomous Liberalisation  
5.14.   The Government’s on -going efforts to empower growth and improve quality, standards and 
competitiveness of the sector include th e unilateral or autonomous liberalisation of a number of 
services sub -sectors in Malaysia. As reported in the last Review, 27 sub -sectors were liberalised for 
foreign participation up to 100 per cent in 2009. A further 18 services sub -sectors were 
autonomo usly liberalised in 2012.  
5.15.   Allowing foreigners to own businesses in Malaysia or in partnership with locals in these 
services sub -sectors have provided opportunities for Malaysians to form strategic alliances and 
other arrangements with leading internationa l firms to upgrade and facilitate knowledge sharing 
and cultivate best practices and establish a viable presence into larger markets overseas through 
the creation of new areas of practice, products and broadened clientele base. Additionally, these 
initiati ves have in turn provided access to a wider choice of services and providers and assisted in 
promoting Malaysia as the preferred investment destination.  
Services Sector Blueprint  
5.16.   With the aspiration of becoming a high -income economy and transforming Malaysia into a 
knowledge -intensive and services -driven economy, the Government has formulated the Services 
Sector Blueprint (SSB) 2015 -2020 which was launched by the Prime Minister on 16 March 2015. 
The SSB 2015 -2020 is a set of horizontal strategies and action plans to address obstacles which 
potentially hinder further growth of the services sector. Among the challenges encountered by 
Malaysia in the sector include shortages in skills including skills mismatches, bottlenecks in the 
regulatory environment and tendency for Malaysian service providers to be inward oriented in 
terms of export services. At the same time, the development of the services sector as the key 
driver of economic growth was also emphasised under the 11MP and guided by the SSB. Under th e 
11MP, the sector is targeted to grow at 6.9% per annum, contributing 56.5% to GDP by 2020, and 
providing 9.6 million jobs. For the period 2010 to 2016, the services sector has recorded an 
expansion with an average growth of 6.4%.  
5.17.   To achieve these targets , a total of 29 Action Plan Items (API) were recommended for 
implementation under the SSB through four policy levers or strategies, namely:  
i. Internationalisation strategy that aims to significantly increase the number of service 
providers in Malaysia as we ll as broaden their reach by addressing existing gaps in 
capabilities and external readiness. The API include creat ing partnerships of strength 
to increase competitiveness among s ervices providers such as large corporation -SME 
partnership programme and ope ning up and harmonis ing markets through G -to-G 
negotiations;  
ii. Effectiveness of investment incentives mechanisms will be enhanced by increasing 
transparency, eliminating duplication and linking to performance;     
iii. Human Capital Development which aims at prod ucing, attracting and retaining skilled 
talent. Among the AIPs that are recommend ed under the SSB include improving  the 
industry readiness of new graduates by fostering greater collaboration between the 
industry, unlock ing the potential of alternative tale nt pools by investing in 
development and training for all employees, and raising the bar for productivity and 
capability of the current workforce by encouraging SMEs to provide training for 
employees; and   
iv. Sectoral Governance Reform to cultivate an effici ent, facilitative policy environment 
and machinery that would provide a thriving and competitive environment for the WT/TPR/G/366 • Malaysia  
 
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  services sector to develop positively. This strategy requires Malaysia to accelerate 
and increase the efficiency of sectoral governance ref orm, ensuring the best 
regulatory development practices are in place for new regulations by expanding and 
accelerating the adoption of the NPDIR , and increasing  the transparency, 
accessibility and user -friendliness of regulations through the introduction o f 
MyRegulations portal.  
5.18.   Since its inception, SSB has achieved commendable progress. In 2016, services export 
recorded 7.5% growth and productivity growth increased by 2.8% to RM  68,166 from RM  66,328. 
Hence, more than 350 services SMEs gained easy access t o financing under credit guarantee 
scheme and 10 SMEs succeeded in participating in large corporation -SME partnership to undertake 
large-scale projects. Five new centres of excellence on high -value R&D work in strategic 
technology areas have been establish ed to provide training and product development. In addition, 
Governance reform on regulation through adoption of NPDIR has been extended throughout the 
states and incentive management being improved through the establishment of ICCO to 
incentivise the serv ices sector growth potential.  
5.19.   The implementation of the SSB with other national masterplans, such as the Logistics and 
Trade Facilitation Masterplan would ensure a well -planned and integrated approach to accelerate 
growth in the services sector.  
Financial Services Sector  
Banking and insurance sector  
5.20.   The financial sector continued to contribute positively to the GDP. The real value -added of 
financial services to GDP stood at over RM  75.3 billion in 2016, accounting for 6.8% of real GDP.  
The Malaysian financial system has also weathered episodes of financial turbulence, weaker growth 
and compressed margins in recent years supported by the strong financial buffers and the 
continued obs ervance of prudent risk -taking. The facilitative business environment in Malaysia 
continues to encourage significant foreign participation in the financial sector with 27 out of 56 
financial institutions (including conventional, Islamic and investment) bei ng fully -foreign owned as 
of the end of July 2017. In the insurance and takaful sector, 31 out of 55 institutions are foreign -
owned.  
5.21.   During the period under Review, there has been steady progress to increase the resilience, 
efficiency and competitiveness o f Malaysia’s financial sector, as envisioned in the Financial Sector 
Blueprint (2011).  Progress has been most notable in the areas of financial inclusion, regulation 
and supervision, regional financial integration and migration to electronic payments. The se 
include:  
i. widening outreach of financial services through growing presence of agent banks 
following the implementation of the Agent Banking Framework that is in line with the 
Bank’s agenda;  
ii. enhanced regulatory and supervisory practices focusing on gover nance and risk 
management through the amendment of the Development of Financial Institutions 
Act 2002 (which came into effect on 31 January 2016) and continued adoption of 
strengthened global standards;  
iii. greater economic efficiency through electronic paymen ts, with the implementation of 
the Payment Card Reform Framework and migration to Chip and PIN; and Malaysian 
Chip Card Specification;  
iv. higher empowerment of consumers, supported by the operationalisation of the 
Ombudsman for Financial Services beginning 1 October 2016;  
v. more effective financial intermediation with the implementation of reforms under the 
Life Insurance and Takaful Framework; and greater flexibility for insurers and takaful 
operators resulting from the liberalisation of the motor and fire tari ffs; WT/TPR/G/366 • Malaysia  
 
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  vi. strengthened regional and financial integration through greater expansion of 
Malaysian banks in the ASEAN region under the ASEAN Banking Integration 
Framework; and  
vii. operationalisation of the Investment Account Platform to channel local and foreign 
Shariah-compliant investments in financing various currencies intermediated by 
Islamic banks from different countries.  
5.22.   In embracing financial technology, Bank Negara Malaysia implemented a Regulatory 
Sandbox Framework on 18 October 2016 to enable the experime ntation of fintech solutions in a 
live environment, subject to appropriate safeguards and regulatory requirements. This framework 
is expected to spur the growth of fintech innovations that could be a game changer with significant 
impacts in the banking lan dscape. As one of the pioneers to implement this in a rapidly changing 
environment, Malaysia is prepared to adapt and to develop mutually beneficial relationships with 
foreign and domestic investors whilst ensuring that there are pragmatic and agile polici es to 
protect the interests of all.  
5.23.   In order to promote Malaysia’s interest to deepen the onshore financial markets, there has 
also been a concerted effort in recent years to promote a stronger alignment of interests and 
shared responsibility among key sta keholders. Thus, a committee consisting of representatives 
from Bank Negara Malaysia, financial institutions, corporations and other key stakeholders in the 
financial market was formed in 2016. This committee, which is known as the Financial Market 
Committ ee (FMC) is responsible for formulating recommendations to foster the development of 
Malaysia’s financial market. Following its inception, a series of measures have been introduced 
since December 2016 including:  
i. allowing exporters to retain up to 25% of ex port proceeds in foreign currency with 
the balance to be converted to Ringgit. Exporters are allowed to reconvert at the 
same rate to finance up to 6 months of their foreign currency obligations in cases 
where retained foreign currency is insufficient;  
ii. requiring payment by resident exporters for settlement of domestic trade in goods 
and services to be made fully in Ringgit;  
iii. according flexibility for non -bank entities and resident investors to undertake 
hedging transactions to manage foreign currency exposur e; 
iv. promoting fair and effective financial markets through global best practices and 
ethical standards; and  
v. allowing all residents to participate in regulated short selling of securities in the 
wholesale money market.   
5.24.   Moving forward, priorities for the de velopment of the financial sector include the following:  
i. developing a vibrant alternative financing and fintech ecosystem to support future 
innovation;   
ii. developing market -based funding solutions for SMEs and frontier industries;  
iii. strengthening the role of development financial institutions to better serve and 
support the development of targeted socio -economic sectors;  
iv. continue developing deep and liquid financial markets, including ensuring the 
availability of cost -effective hedging instruments to manage ri sk exposure; and  
5.25.   elevating the role of insurance and takaful to meet the protection and risk management 
needs of Malaysian households and businesses.  WT/TPR/G/366 • Malaysia  
 
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  Capital Market Sector  
Phased and Pragmatic Liberalisation  
5.26.   Guided by the Capital Market Masterplan (CMP) (2 001-2010) and Capital Market Masterplan 
2 (CMP2) (2011 -2020), Malaysia has undertaken a process of phased and pragmatic liberalization 
in the capital market to derive maximum value from globalisation, while ensuring that the 
transition to a more liberalise d market environment does not give rise to undue adjustment 
difficulties for the domestic capital market and the broader Malaysian economy.  
5.27.   In tandem with this strategic approach, Malaysia has fully liberalised all limitations on 
foreign equity shareholding in the capital market. Foreign equity restrictions in unit trust 
management companies were lifted in 2014 and most recently full foreign ownership in credit 
rating agencies were allowed as of 1 January 2017. With the implementation of these li beralisation 
measures, all existing foreign equity restrictions in the capital market have been removed.  
Growth with Governance  
5.28.   The CMP2 outlines the growth strategies to expand the role of the capital market; and 
formulation of governance strategies for i nvestor protection and market stability. On 26 April 
2017, the SC released the new Malaysian Code on Corporate Governance (MCCG). The aim was to 
place greater emphasis on the internalisation of corporate governance culture not just among 
listed companies, but also encourages non -listed entities including state -owned enterprises, SMEs 
and licensed intermediaries to embrace the code. It also sets an important milestone for Malaysia 
in promoting good corporate governance to ensure sustainability and resilience  of the capital 
market.  
Digitalisation Agenda to Power Growth of the Capital Market  
5.29.   One of the key drivers of the SC’s developmental strategy is the digitalisation agenda. Since 
2014, the SC has embarked on efforts to enable both businesses and investors to benefit from a 
regulatory framework that will facilitate wider accessibility to market -based financing avenues as 
well as utilizing technology to enable greater investor participation. This has led to the introduction 
of an equity -based crowdfunding (EC F) framework in February 2015. In Malaysia, the growth of 
ECF activities has been encouraging where as of end July 2017, 30 issuers have succeeded in 
collectively raising a total of RM  19.9 million through six registered ECF operators. The ECF 
platforms ar e expected to gain further momentum over the coming years.  
5.30.   In 2016, the SC focused its efforts to facilitate peer -to-peer (P2P) financing, a form of 
digital innovation which broadens the ability of entrepreneurs and small business owners to unlock 
capital from a pool of individual investors in small amounts. The P2P framework was launched in 
April and expected to be fully operational by the end of 2017.  
5.31.   The launch of the Digital Investment Management (DIM) framework in May 2017 is part of 
the SC’s on -going  efforts to bring financial inclusion to the masses through the use of technology. 
DIM is a fund management business which incorporates innovative technologies into discretionary 
portfolio management services. This framework aims to increase investors’ par ticipation by 
providing them with a new mode of investment, which is more convenient, affordable and 
accessible to manage and grow their wealth.  
5.32.   As part of the SC’s initiative to catalyse greater interest and visibility towards nurturing the 
development of  digital finance, the SC launched the Alliance of FinTech Community (aFINity) at the 
World Capital Market Symposium (WCMS) in September 2015. To date, over 100 industry 
participants have registered with aFINity.  
5.33.   In June 2017, the SC entered into an Innovat ion Cooperation Agreement with the Australian 
Securities and Investment Commission (ASIC) to further promote innovation in financial services. 
Under the agreement, the SC and ASIC will work closely to share information on emerging trends 
and regulatory iss ues in digital finance. Both regulators will also facilitate referrals of innovative 
businesses seeking to operate in each other’s jurisdictions, as well as explore potential joint 
innovation projects relating to the application of new technologies.  WT/TPR/G/366 • Malaysia  
 
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  Greate r Capital Market Interconnectivity  
5.34.   Recognising the importance of green finance as a new asset class, the SC through the ACMF 
took a leadership position in driving the agenda in the ASEAN region, beginning with its efforts to 
develop ASEAN Green Bond Standa rds (GBS). In March 2017, an announcement on the 
cooperation between ACMF and the International Capital Market Association (ICMA) was made to 
introduce ASEAN GBS that will be applied across capital markets in ASEAN. This initiative will 
facilitate ASEAN ca pital markets in tapping green finance to support sustainable regional growth 
and as an avenue to meet investors who are interested in green investments. It is also a part of 
ACMF’s broader efforts in developing green finance for the region.  
Widen Islamic Capital Market’s International Base  
5.35.   The Islamic Capital Market (ICM) is a significant pillar of Malaysia’s well -developed Islamic 
finance industry, in which Malaysia is widely recognised as the leading centre for innovation in 
Shariah -compliant products a nd services. Based on this, greater internationalisation of the capital 
market is a critical aspect of the strategy to strengthen Malaysia’s position as a global ICM hub.  
5.36.   The implementation of CMP and CMP2 recommendations has underpinned the healthy 
growth  of Malaysia’s ICM. Over the past decade, the ICM in Malaysia has more than tripled in size 
between 2005 and 2015. During this period, it registered a compounded annual growth rate 
(CAGR) of 11.7% with the market capitalisation of Shariah -compliant equitie s and the value of 
sukuk5 outstanding in Malaysia increasing at a CAGR of 9.5% and 17.6% respectively. By end 
2015, Malaysia’s ICM reached a size of RM  1.7 trillion and accounted for 60.1% of the total size of 
the Malaysian capital market.  
5.37.   To further drive  the development and growth of Malaysia’s ICM, the SC launched a five -year 
Islamic Fund and Wealth Management Blueprint (Blueprint) on 12 January 2017. The Blueprint 
identifies strategies and key initiatives to strengthen Malaysia’s positioning as a global  hub for 
Islamic funds. It also aims to establish Malaysia as a regional centre for Shariah -compliant 
sustainable and responsible investment (SRI), leveraging Malaysia’s position as the largest SRI 
market in Asia.  
5.38.   The SRI Sukuk Framework launched on 28 Aug ust 2014 is an extension of the existing 
sukuk framework, and aims to facilitate the financing of sustainable and responsible investment 
initiatives. The Framework identifies four broad areas for determining project eligibility namely 
natural resources, en ergy-related, social impact and waqf.6 
5.39.   Sukuk that has been issued under the SRI framework include a social impact sukuk as well 
as Malaysia’s first green sukuk which was issued on 27 July 2017. The green sukuk is envisaged as 
an innovative instrument to ad dress global funding gaps in green financing.  
Promote Capital Formation  
5.40.   To further enhance investors’ awareness as well as giving due recognition to the mid and 
small -cap companies that have been generally under -researched, on 25 May 2017, the SC 
launched  the Mid and Small Cap (MidS) Research Scheme together with Bursa Malaysia and 
industry.  
5.41.   The MidS Research Scheme was initiated with the primary objective of creating better value 
recognition of mid and small -cap companies as they form an important segmen t of the listed 
equity asset class within the overall capital market. Under this Scheme, an inaugural batch of 100 
mid and small -cap public listed companies (PLCs) will receive independent analyst coverage by 
licensed research houses.  
                                                
5 Means certificates of equal value which evidence undivided ownership or investment in the assets 
using Shariah principles.  
6 Islamic endowment – a voluntary and irrevocable endowment of Shariah -compliant assets for Shariah 
compliant purposes.  WT/TPR/G/366 • Malaysia  
 
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  5.42.   The SC also introduce d the private retirement scheme (PRS) in 2012 to allow a wider cross -
section of the public to access the capital market for their retirement needs. PRS serves as the 
voluntary pillar in Malaysia’s retirement ecosystem. Collective efforts by the SC, PRS Pro viders and 
the Private Pension Administrator (PPA)7 in growing the PRS industry have seen the industry 
expanding to over 250,000 members with total assets crossing RM  1.7 billion as of July 2017.   
6  OTHER DOMESTIC POLIC IES 
6.1  Competition Act 2010  
6.1.  The Malaysian Competition Commission (MyCC) which is under the purview of the Ministry of 
Domestic Trade, Cooperatives and Consumerism is an independent body established to enforce the 
Competition Act 2010 (the Act) since 1 January 2012. The Act is implemented to stimul ate 
economic development by creating healthy competition which would in turn stimulate productivity, 
innovation and entrepreneurship. Thus, the Act enhances consumer welfare through creating wider 
choices of products with better quality and reasonable pric es, and also provides foreign investors 
more confidence in the country's business practices. There have not been significant changes to 
the regulatory framework since the previous TPR of Malaysia8, except for the publication of several 
new implementation guidelines by MyCC. The First Schedule of the Competition Act does not apply 
to commercial activities regulated by the following legislations, namely the Communications and 
Multimedia Act 1998, Ene rgy Commission Act 2001, Petroleum Development Act 1974 and 
Malaysian Aviation Commission Act 2015.  
6.2.  MyCC has undertaken various advocacy programmes to raise awareness and inculcate a 
culture of compliance of the Competition Act 2010 in Malaysia. These inc lude conducting local and 
international advocacy programmes for various sectors of the economy and government bodies 
(totalling 215 events for the period January 2011 -July 2017); signing Memorandum(s) of 
Understanding (MOU) with BN M in 2014 and public/priv ate universities in 2015; implementing 
MyCC’s “Strategic Plan for Competition Advocacy and Communication 2015 -2017” ; and 
undertaking market reviews for various industries or market conditions such as broiler chicken 
industry in West Malaysia (2012), price -fixing by professional bodies (2013), pharmaceutical 
sector in Malaysia (2017), and building materials in the construction industry (2017).  
6.3.  For the period January 2012 to July 2017, MyCC has successfully resolved or closed 93% or 
297 out of 319 complaints,  as well as investigation of 40 infringement cases out of 45 cases which 
have been b rought to its attention. Final d ecisions issued by the MyCC under Section 40 of the 
Competition Act 2010 (Finding of Infringement) included high -profile cases such as those  against 
Malaysia Airline System Berhad, AirAsia Berhad and Air Asia X Sdn. Bhd. (MAS) (March 2014); 
Tube Ice Manufacturers (January 2015); Container Depot Operators Penang (June 2016) and My 
E.G. Services Berhad (June 2016). Section 40(4) of the Competiti on Act 2010 grants MyCC 
remedial powers to impose financial penalty not exceeding 10% of the world -wide turnover of an 
enterprise found to have infringed the prohibitions of the Act over the period during which the 
infringement occurred.  
6.2  Strategic Trade Ac t 2010  
6.4.  As part of fulfilling Malaysia’s commitment in implementing the United Nations Security 
Council Resolution 1540 (UNSCR 1540), the Strategic Trade Act (STA) 2010 has been 
implemented since January 2011. The legislation provides control over the export, transit, 
transhipment and brokering of strategic items, including arms and related material and other 
activities that will or may facilitate the design, development and production of Weapons of Mass 
Destruction (WMD) and their delivery systems. The  focal point for the implementation of STA 2010 
in Malaysia is the Strategic Trade Secretariat (STS) established in MITI. The implementation of 
STA 2010 has benefitted Malaysia in enhancing and promoting its image as a safe country to trade 
with, which has  aligned with its efforts to facilitate trade in a secure trading environment and 
building confidence among foreign investors.  
                                                
7 The Private Pension Administrator Malaysia (PPA) is the central administrator for the Private 
Retirement Schemes (PRS).   
8 WT/TPR/G/292/ Rev.1 .  WT/TPR/G/366 • Malaysia  
 
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  6.5.  After six years of implementation, STA 2010 underwent the GRP -RIA process to review and 
amend the legislation to ensure that it b ecomes more trade -facilitative in governing the industry 
and export communities while simultaneously not compromising the trade security elements. The 
amendments include the reduction of penalties and introduction of compoundable offences, 
exclusion of anc illary services from the registration of broker, waiver of the requirement of 
providing an End -User-Statement and introduction of new sections such as section on presumption 
of export. The amendment Bill was tabled and approved by the Parliament in April 2 017, published 
in the official gazette on 21 June 2017 and came into effect on 8 September 2017.  
6.3  National Policy on Biological Diversity 2016 -2025  
6.6.  As one of the 17 megadiverse countries globally, Malaysia’s biological diversity is among the 
richest in the world – harbouring an enormous range of plants, animals and marine life, which has 
created a unique ecosystem. However, Malaysia’s biodiversity has continuously faced challenges 
and threats caused by internal and external factors, including environmental c hanges brought 
about by socio -economic and trade activities of the people.  
6.7.  To mitigate the impacts of such changes, the Government introduced the National Policy on 
Biological Diversity 2016 -2025 (NPBD) to serve as a national guide for biodiversity manage ment 
over the next 10 years. It also reflects the Government’s effort and initiative to strongly and 
continuously emphasize on continued conservation, sustainable utilization and shared benefits 
from biodiversity in a fair and equitable manner, as well as to strengthen the involvement and 
participation of all relevant stakeholders. More recently, the NPBD is also becoming a template for 
economic drive for sectors related to conservation, preservation and protection of biodiversity such 
as ecotourism.  
6.8.  The M inistry of Natural Resources and Environment (NRE) plays the leading role in the 
implementation and monitoring of the NPBD, including providing overall direction, coordinating 
stakeholder actions, establishing the appropriate institutional platforms, facil itating resource 
mobilisation and initiating review of the Policy as necessary. NRE undertakes this role in 
consultation, coordination, cooperation and partnership with state governments, relevant 
government bodies, private sector, civil society, as well a s indigenous people and local 
communities.  
6.4  Companies Act 2016  
6.9.  The new Companies Act 2016 was passed by the Parliament in April 2016 pursuant to 
corporate law’s regulatory review and reform process since 2003. It has been enforced by the 
Companies Commissio n of Malaysia (CCM) since 31 January 2017 (except section 241 on 
mandatory registration of companies’ secretaries with the Registrar, and Division 8 of Part III on 
Corporate Rescue Mechanism). The new Act encapsulates the dynamic business environment in 
today’s global corporate scenario, as well as Malaysia’s consistent economic growth.  
6.10.   As a legislation which is at par with the global standards, it modernizes the corporate legal 
framework in Malaysia to facilitate and reduce the time and cost taken in star ting a business in 
Malaysia. The reduction of the cost of doing business will be a result of the introduction of several 
deregulatory measures which directly and indirectly reduce the costs of compliance. 
Simultaneously, the Companies Act 2016 ensures that  the process for starting a business in 
Malaysia is more competitive, and this will attract more investments and promote SMEs growth in 
Malaysia. Improvements of the legislation stipulated in the new Act include:  
i. Incorporation of a company is now streamlin ed to facilitate starting a business and 
reduce the time and cost of doing business. The new features include: A company 
can now be incorporated by a single member who can also be sole director; 
Incorporation of a company without the need to engage a compa ny secretary; 
Requirements for Memorandum and Articles (M&A) at the point of incorporation with 
conferment of unlimited capacity to companies (with no stamping fee) and doctrine 
of constructive notice have been removed or repealed; Statutory declaration by  
Promoters/Directors is now replaced with statement of compliance; and the number 
of documents needed for incorporation purposes has also been reduced to a single 
incorporation template;  WT/TPR/G/366 • Malaysia  
 
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  ii. Introduction of the No Par Value (NPV) regime whereby companies will no longer be 
required to state its authorised share capital – i.e., flat rate fee for incorporation as 
opposed to ad valorem based. The procedures for increasing share capital have also 
been made concise and less costly;  
iii. Simplification and clarification o f companies’ management, meeting procedures and 
internal decision making process that would provide flexibilities to firms in the day -
to-day operations. For instance, mandatory requirement of Annual General Meetings 
has been relaxed, decoupling of the requ irement to lodge Annual Return with 
financial statements and the prohibition on persons who can be appointed as proxies 
has been lifted.  
iv. Strengthening the corporate governance structure, such as, the minimum age for 
directorship has been clarified, while t he maximum age has been abolished; 
restructuring rules related to the appointment, resignation and removal of directors; 
as well as stricter rules pertaining to directors’ remuneration. Disclosure of beneficial 
interest in voting shares is also extended to  all companies;  
v. The roles, functions and obligations of companies’ secretaries have been reinforced. 
Practising secretaries are now required to register with the Registrar before they can 
act as a secretary. The Registrar is also empowered to direct a comp any to appoint a 
qualified company secretary if the company has not complied with the provisions of 
the new Act; and  
vi. Introduction of new provisions to enhance the winding up process, including 
shortening the time taken to wind up a company, enhancing the r ights of creditors, 
enhancing the roles of liquidators to facilitate smooth process of liquidation, and 
introducing provisions on corporate voluntary arrangement and judicial management 
(to be enforced at a later date).  
6.11.   Changes have also been made on the enforcement regime. The level of penalties for fines 
and imprisonment has been increased as part of deterrence measures. Criminal sanctions will also 
be imposed against persons who make or furnish or knowingly authorize or permit the making or 
furnishing o f any false or misleading statement, information or report to the Registrar relating to 
affairs of a corporation, or any matter or thing required by the Registrar or the enforcement of the 
Act. 
6.5  E-Commerce and Digital Economy in Malaysia  
6.12.   The National eComme rce Strategic Roadmap (NeSR) was developed by the Malaysia Digital 
Economy Corporation (MDEC) to tap into the future of e -commerce and digital economy in 
Malaysia, through extensive consultations with various public and private stakeholders. The 
initiative  is also to chart the pathway forward and unlock the transformative potential of online 
business and transactions. The Roadmap was launched by the Prime Minister on 13 October 2016. 
The Government has also established the National eCommerce Council (NeCC),  which is chaired by 
the Minister of International Trade and Industry and comprises various Ministries and Agencies, to 
govern, drive and foster coordination in the implementation of the Roadmap towards doubling 
Malaysia’s e -commerce growth rate and reachi ng its GDP contribution of RM  211 billion 
(approximately US$47.68 billion) by 2020.  
6.13.   Malaysia’s e -commerce imperative is two -fold, (i) to future -proof existing businesses, 
including by bringing roughly 80% of SMEs into the e -commerce world and ensuring thei r 
capabilities to keep pace with an online market poised to grow much faster than offline sales; and 
(ii) to expand market access, beyond its own 16 million digital customers to compete for more 
than 87 million digital customers in the ASEAN region and ult imately 1 billion digital customers 
worldwide. With these in mind, the NeSR outlines Government intervention in six thrust areas 
which are built on good and affordable infrastructure and supportive governance framework. The 
six thrust areas are acceleratin g seller adoption of e -commerce; increasing adoption of 
eProcurement by businesses; lifting non -tariff barriers in areas such as e -Fulfillment, cross -border 
trade, e -Payment, and consumer protection; realigning existing economic incentives; making 
strategi c investments in select e -commerce player(s); and promoting national brand to boost WT/TPR/G/366 • Malaysia  
 
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  cross-border e -commerce. A total of 13 programmes across the six thrusts have been prioritized 
for the near term to deliver significant impact. These programmes are champio ned by 10 
Ministries/Agencies and monitored by the NeCC.  
6.14.   To further boost the NeSR implementation, the Digital Free Trade Zone (DFTZ) was 
launched on 22 March 2017 by the Prime Minister together with Jack Ma, Founder and Executive 
Chairman of Alibaba Grou p. DFTZ has the potential to double the growth rate of Malaysian SMEs’ 
goods export by 2025. It is also estimated to support US$65 billion worth of goods moving through 
DFTZ, while simultaneously creating 60,000 direct and indirect jobs by 2025.  
6.15.   DFTZ is a  testament to Malaysia’s unwavering commitment to propel SMEs’ growth through 
e-commerce. It will provide physical and virtual zones to facilitate SMEs to capitalise on the 
convergence of exponential growth of the internet economy and cross -border e -commer ce 
activities; and to establish Malaysia as a regional e -fulfillment hub. DFTZ will also act as a 
microcosm to support internet companies to trade goods, provide services, innovate and co -create 
solutions.  
6.16.   DFTZ’s implementation of physical and virtual zone s will be undertaken in phases. The first 
eFulfillment Hub will be at KLIA Aeropolis which has been developed to focus on the key clusters of 
air cargo and logistics, aerospace, and aviation. DFTZ will be rolled out in phases starting from Q4 
of 2017. The other physical component of DFTZ is the Satellite Services Hub. Kuala Lumpur 
Internet City (KLIC) will be DFTZ’s first satellite services hub. KLIC is set to be the premier digital 
hub for global and local internet -related companies targeting Southeast Asi a. It will comprise key 
players within the internet ecosystem to facilitate end -to-end support, networking and knowledge -
sharing that will drive innovation in the internet economy and the e -commerce industry. At the 
same time, the virtual zone, which is th e DFTZ E -Services Platform, will help to deliver a 
streamlined and efficient experience through an integrated platform.  
6.17.   In Budget 2018, the Government will provide RM  83.5 million to construct infrastructure for 
the first phase of DFTZ in Aeropolis, KLIA; and increase the de minimis or minimum value for 
imports from RM  500 to RM  800 to establish Malaysia as the regional e -commerce hub.  
7  WAY FORWARD  
7.1.  Despite the external economic uncertainties, Malaysia’s economy is forecasted to grow more 
than 5.0 -5.5% in 20 17. The positive outlook echoes well with the announcement made by Prime 
Minister Datuk Seri Najib Razak in December 2016 which highlighted Malaysia’s potential to grow 
to a RM  2 trillion economy by 2025 from the current size of RM  1.3 trillion. This poten tial is 
achievable in seven years if the country’s economic growth remains at an average of 5% annually. 
In addition to undertaking structural and regulatory reforms, the target is being supported by 
implementation of mega -scale infrastructure projects whi ch will spur domestic economic activities 
and benefit the people through high -income jobs creation.  
7.2.  Another significant step towards achieving the bold target that the Prime Minister has set is 
to look into the development of a conducive domestic environm ent that fosters seamless cross -
border trade, investment and businesses. In this new age of rapid technological advancements, 
the Government is committed to quantum leap the industrial transformation to Industry 4.0 and 
thus fundamentally change the trajec tory of the country’s growth. Towards this end, the National 
Industry 4.0 Policy Framework is being formulated in collaboration with key stakeholders from 
private and public sectors. Emphasis of the policy framework is on the progress of infrastructure 
and ecosystem, funding and incentives, talent and human capital, technology and standards, as 
well as enhancing SMEs’ capacity to move up to Industry 4.0. The provision of RM  245 million 
worth of matching grant under the Strategic Domestic Investment Fund wil l also be used to 
upgrade Smart Manufacturing facilities, which are an important dimension of Industry 4.0.  
7.3.  The timing now is even more crucial as Malaysia enters the final lap towards achieving a high 
income nation by 2020 particularly through the realisa tion of the initiatives under the 11MP and 
NEM. While a lot of progress has been achieved, the Government will continuously monitor and 
undertake measures to achieve the set targets.  WT/TPR/G/366 • Malaysia  
 
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  7.4.  To position Malaysia as a top 20 nation in economic development, social advancement and 
innovation in the next thirty years, the Government introduced the  Transformasi Nasional 2050 
(2021 -2050), or TN50 in January 2017. TN50 adopts an inclusive and consul tative approach which 
focuses on collective collaboration from all segments of society through a bottom -up syndication 
process. This is the unique feature of the TN50 agenda where it is formulated by the people, for 
the people. Comprehensive engagement eff orts are being undertaken by all ministries to ensure 
that no stones are left unturned in order to collect citizens’ aspirations and inputs to shape the 
TN50 agenda with clear, measurable goals and targets. The TN50 policy document is expected to 
be launch ed in September 2018.   
__________