RESTRICTED  
  
WT/TPR/S/292  
27 January 2014  
(14-0370)  Page: 1/141  
Trade Policy Review Body   
 
TRADE POLICY REVIEW 
REPORT BY THE SECRETARIAT 
MALAYSIA  
This report, prepared for the sixth Trade Policy Review of Malaysia, has been drawn up by the WTO 
Secretariat on its own responsibility. The Secr etariat has, as required by the Agreement 
establishing the Trade Policy Review Mech anism (Annex 3 of the Marrakesh Agreement 
Establishing the World Trade Organization), sought clarification from Malaysia on its trade policies 
and practices.  Any technical questions arising from this report may be addressed to Sergios Stamnas 
(tel: 022/739 5382) and Katie Waters (tel: 022/739 5067). 
 Document WT/TPR/G/292 contains the policy statement submitted by Malaysia. 
 
 
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 Re view Body on Malaysia. This report was drafted 
in English. WT/TPR/S/292 • Malaysia 
 
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  CONTENTS 
SUMMARY ....................................................................................................................... . 7 
Economic Envi ronment ...................................................................................................... 7  
Trade Policy Fr amework ..................................................................................................... 8  
Trade Policy Developments ................................................................................................. 8  
Sectoral Policy Developments ............................................................................................ 10 
Outlook ....................................................................................................................... ... 11 
1   ECONOMIC ENVIRONMENT ........................................................................................ 12  
1.1   Overview ................................................................................................................. 12 
1.2   Recent Econ omic Perf ormance .................................................................................... 12 
1.3   Balance of payments ................................................................................................. 16 
1.4   Key Policy Developments ........................................................................................... 17 
1.4.1   Macroeconomic policies ........................................................................................... 17 
1.4.2   Structural policies .................................................................................................. 18 
1.4.2.1   Fiscal re form/conso lidation ................................................................................... 18 
1.4.2.2   Privatization .......................................................................................................  19 
1.4.2.3   Competition policy .............................................................................................. 19 
1.4.2.4   Corporate governance  and anti-corru ption action ..................................................... 19 
1.4.2.5   Labour market policies ......................................................................................... 20 
1.5   Composition an d Pattern of  Trade ............................................................................... 21 
1.6   Trends and Patterns in Foreign Direct Investment ......................................................... 23 
2   TRADE AND INVE STMENT RE GIME ............................................................................ 26  
2.1   Introduction ............................................................................................................. 26 
2.2   Genera l Framework .................................................................................................. 26 
2.3   Trade Policy Form ulation and Ob jectives ...................................................................... 27 
2.4   Trade Agreements and Arrangements .......................................................................... 29 
2.4.1   WTO ................................................................................................................... . 29 
2.4.2   Regional and preferenti al agreements (R TAs and PTAs) ............................................... 29 
2.4.2.1   RTAs ................................................................................................................ . 29 
2.4.2.2   PTAs ................................................................................................................ . 33 
2.4.3   Other agreements and arrangements ........................................................................ 33 
2.5   Investme nt Regime .................................................................................................. 34 
2.5.1   Overview ..............................................................................................................  34 
2.5.2   Foreign investment regime ...................................................................................... 35 
3   TRADE POLICIES AND PRACTICES BY MEASURE ........................................................ 37  
3.1   Introduction ............................................................................................................. 37 
3.2   Measures Direct ly Affectin g Imports ............................................................................ 38 
3.2.1   Customs procedures, customs valuation, and ru les of origin ......................................... 38 
3.2.1.1   Registration, documentat ion, and clearanc e requirements ......................................... 38 
3.2.1.2   Customs valuation ............................................................................................... 40 WT/TPR/S/292 • Malaysia 
 
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  3.2.1.3   Rule s of or igin .................................................................................................... 40 
3.2.2   Tariffs ............................................................................................................... ... 40 
3.2.2.1   Applied MFN tariffs .............................................................................................. 41 
3.2.2.2   MFN tariff disp ersion and e scalation ....................................................................... 43 
3.2.2.3   Tariff rate qu otas ................................................................................................ 44 
3.2.2.4   Tari ff bindings .................................................................................................... 45 
3.2.2.5   Duty conc essions/exem ptions ............................................................................... 45 
3.2.2.6   Tariff preferences ................................................................................................ 46 
3.2.3   Import licensing, re strictions, and prohibitions ........................................................... 46 
3.2.3.1   Licensing ...........................................................................................................  46 
3.2.3.2   Quotas ..............................................................................................................  47 
3.2.3.3   Prohibitions ........................................................................................................  48 
3.2.4   Continge ncy measures ........................................................................................... 48 
3.2.5   Standards and othe r technical requirements .............................................................. 49 
3.2.5.1   Standards, testing, and certification ....................................................................... 49 
3.2.5.1.1   Malaysian standards ......................................................................................... 49 
3.2.5.1.2   Halal certification ............................................................................................. 50 
3.2.5.1.3   Accreditation and quality management standards .................................................. 51 
3.2.5.1.4   Internat ional cooperation .................................................................................. 51 
3.2.5.1.5   Transparency ................................................................................................... 51 
3.2.5.2   Sanitary and ph ytosanitary re gulations .................................................................. 52 
3.2.5.2.1   F ood stan dards ................................................................................................ 52 
3.2.5.2.2   Biosafety ......................................................................................................... 53 
3.2.5.2.3   Risk analysis .................................................................................................... 53 
3.2.5.2.4   Transparency ................................................................................................... 53 
3.2.5.3   Labelling and packaging requirements .................................................................... 54 
3.2.6   Governme nt procurement ....................................................................................... 54 
3.2.7   State trading ......................................................................................................... 57 
3.3   Measures Directly Affecting Exports ............................................................................. 57 
3.3.1   Procedures ........................................................................................................... 57 
3.3.2   Export prohibitions, restrictions, and licensing ............................................................ 58 
3.3.3   Export du ties and taxes .......................................................................................... 58 
3.3.4   Duty and tax concessions ........................................................................................ 59 
3.3.5   Export subsidies .................................................................................................... 59 
3.3.6   Free zones an d other me asures ............................................................................... 60 
3.3.7   Export finance, in surance, and guarantees ................................................................ 60 
3.3.8   Export promotion ................................................................................................... 60 
3.4   Measures Affectin g Production and Trade ..................................................................... 61 
3.4.1   Taxation an d tax incentives ..................................................................................... 61 
3.4.1.1   Indi rect ta xes ..................................................................................................... 62 WT/TPR/S/292 • Malaysia 
 
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  3.4.1.2   Di rect ta xes ....................................................................................................... 63 
3.4.1.3   Tax incentives .................................................................................................... 63 
3.4.2   Financial assistance ................................................................................................ 64 
3.4.2.1   Funding and ot her financial measures .................................................................... 65 
3.4.2.1.1   Technology and R&D ......................................................................................... 65 
3.4.2.1.2   SMEs ..............................................................................................................  65 
3.4.2.2   Other subsidies ................................................................................................... 66 
3.4.3   Government-linked companies ................................................................................. 68 
3.4.4   Competition and cons umer protection policy .............................................................. 69 
3.4.4.1   Competition policy .............................................................................................. 69 
3.4.4.2   Price and supply controls ...................................................................................... 71 
3.4.4.3   Consum er protection ........................................................................................... 73 
3.4.5   Corporat e governance ............................................................................................ 73 
3.4.6   Intellectual property rights ...................................................................................... 74 
3.4.6.1   Indust rial property .............................................................................................. 75 
3.4.6.1.1   Patent and utility models ................................................................................... 75 
3.4.6.1.2   Trade marks .................................................................................................... 76 
3.4.6.1.3   Geographical indications .................................................................................... 76 
3.4.6.1.4   Plant va riety protection ..................................................................................... 77 
3.4.6.1.5   Industrial designs and layout designs of integrated circuits (topographies) ................ 77 
3.4.6.1.6   Trade secrets ................................................................................................... 78 
3.4.6.2   Copyright and related rights ................................................................................. 78 
3.4.6.3   Enforcement ....................................................................................................... 79 
4   TRADE POLICIES BY SECTOR ..................................................................................... 82  
4.1   Introduction ............................................................................................................. 82 
4.2   Agricultur e and live stock ........................................................................................... 83 
4.2.1   Features ............................................................................................................... 83 
4.2.2   Govern ment policy ................................................................................................. 84 
4.2.3   Border  measures ................................................................................................... 85 
4.2.4   Domestic support ................................................................................................... 86 
4.2.5   Rice .................................................................................................................. ... 87 
4.3   Fisheries ............................................................................................................... .. 88 
4.4   Mining and quarrying ................................................................................................ 90 
4.5   Energy .................................................................................................................. .. 91 
4.5.1   Hydrocarbons ........................................................................................................ 94 
4.5.2   El ectricity ........................................................................................................... .. 96 
4.6   Manuf acturi ng .......................................................................................................... 98 
4.6.1   Automoti ve industry ............................................................................................... 99 
4.7   Services ................................................................................................................  102 
4.7.1   Intr oduction  ........................................................................................................ 1 02 WT/TPR/S/292 • Malaysia 
 
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  4.7.2   Financial Services ................................................................................................ 105  
4.7.2.1   Intr oduction  ..................................................................................................... 10 5 
4.7.2.2   Onshore banking ............................................................................................... 108  
4.7.2.3   Onshor e insurance ............................................................................................ 109  
4.7.2.4   Labuan (offshore ) banking and insurance ............................................................. 110  
4.7.2.5   Development fi nance instit utions ......................................................................... 111  
4.7.3   Telecommunications ............................................................................................. 112  
4.7.4   Air Transport ....................................................................................................... 114  
4.7.4.1   Institutional an d regulatory structur e ................................................................... 114  
4.7.4.2   Airports and gr ound handling services .................................................................. 114  
4.7.4.3   Airlines and ai r services ag reements .................................................................... 114  
4.7.4.4   Sales, reservation, marketing, repair, and maintenance services .............................. 116  
4.7.5   Maritime Transport............................................................................................... 116  
4.7.5.1   Legal and inst itutional framework ........................................................................ 116  
4.7.5.2   Shipping .......................................................................................................... 1 16 
4.7.5.3   Ports ...............................................................................................................  117 
4.7.5.4   Maritime transport-related commitments made under the GATS and RTAs ................. 118  
4.7.6   Tourism .............................................................................................................. 118  
4.7.7   Profession al services ............................................................................................ 121  
4.7.7.1   Accounting (including au dit) and taxation  services ................................................. 121  
4.7.7.2   Legal services ................................................................................................... 122  
4.7.7.3   Architectural services......................................................................................... 122  
4.7.7.4   Engineering services .......................................................................................... 122  
4.7.7.5   Quantity su rveying serv ices ................................................................................ 123  
REFERENC ES ................................................................................................................ 124  
5   APPENDIX TABLES .................................................................................................. 130  
 
CHARTS 
 Chart 1.1 Product composition of merchandise trad e, 2009 an d 2012 ...................................... 22
 
Chart 1.2 Direction of merchandise trade, 2009 and 2012 ...................................................... 23 
Chart 1.3 Foreign direct investment stock, 2008 and 2012 ..................................................... 24 
Chart 1.4 Direct investment abroad stock,  2008 and 2012 ..................................................... 25 
Chart 2.1 FTA negoti ation procedures ................................................................................. 27 
Chart 2.2 Vision 2020 and associated economic and soci al stra tegies....................................... 28 
Chart 3.1 Average applied MFN tariff ra tes, by HS sect ion, 2009 an d 2013 ............................... 42 
Chart 3.2 Distribution of M FN tariff rates,  2009 and 2013 ...................................................... 43 
Chart 3.3 MFN tariff escalation by two-digit ISIC indu stry, 2009 an d 2013 ............................... 44 
Chart 4.1 Structure of the financial sector, by asset share, 2012 ........................................... 105  
Chart 4.2 Insurance: total premium volume , 2008-12  ......................................................... 109  
Chart 4.3 Tourist arrivals, 2012 ....................................................................................... 119  WT/TPR/S/292 • Malaysia 
 
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  TABLES 
 Table 1.1 Selected macroeco nomic indicato rs, 2009- 12 ......................................................... 13
 
Table 1.2 Basic economic and social indicators, 2009-12 ....................................................... 14 
Table 1.3 Balance of payments, 2009-12 ............................................................................. 16 
Table 2.1 RTAs in force, July 2013 ...................................................................................... 29 
Table 2.2 Main features of new RTAs, 2010-13 ..................................................................... 31 
Table 3.1 Malaysia's tariff structure, 20 09 and 2013 ............................................................. 41 
Table 3.2 Summary analysis of the Ma laysian preferenti al tariff , 2013 ..................................... 46 
Table 3.3 Malaysian standards aligned to  international stan dards, 2008 and 2012 ..................... 50 
Table 3.4 Structure of direct and indirect tax revenue, 2009-12 .............................................. 61 
Table 3.5 Raids and inspections relate d to copyright infr ingement, 2009-12  ............................. 80 
Table 4.1 Self-suffici ency ratios , 2009-12  ............................................................................ 84 
Table 4.2 Overview of domestic agricultural support measures, 2009-11 .................................. 87 
Table 4.3 Energy subsidies,  2009- 11 .................................................................................. 93 
Table 4.4 Fuel price subsidies and comparison, 2012 ............................................................. 96 
Table 4.5 Services commitments in Ma laysia's trade ag reements, 2013 ................................. 104  
Table 4.6 Banking institutio ns, 2009, 2011, an d 2013  ......................................................... 108  
Table 4.7 Insurance companies,  2012 ............................................................................... 110  
Table 4.8 Offshore banking and services, 2012 ................................................................... 111  
Table 4.9 Selected telecommunication indicators, 2009-12 ................................................... 112  
Table 4.10 Telecommunications licensing regi me, 2013  ....................................................... 113  
Table 4.11 Domestic market share of Malays ian carriers (passenger  transport) , 2010-12 ......... 115  
Table 4.12 ASEAN ASAs, 2013  ......................................................................................... 115  
Table 4.13 Fiscal incentives for hotels and tourism projects, 2013 ......................................... 120  
 
BOXES 
 
Box 4.1 Services liberalization, 2010-13 ............................................................................ 102  
 
APPENDIX TABLES 
 
Table A2. 1 WTO notifications, 1 January 2010 to 31 October 2013 ....................................... 130  
 
Table A3. 1 Malaysia's tari ff summary, 2009 and 2013  ........................................................ 132  
 
Table A4. 1 Quota utilization  for TRQ prod ucts, 2011 .......................................................... 134  
Table A4. 2 Services liberalization, 2009-13 ....................................................................... 136  
Table A4. 3 Legislation governin g services sect ors, 2013  ..................................................... 139  
Table A4. 4 Federal and state ports: volume of traffic, ownership, and operation, 2013 ............ 140  
Table A4. 5 Maritime transport commitments under the GATS and FTAs: market access, 
modes 1-3 .................................................................................................................... 141 WT/TPR/S/292 • Malaysia 
 
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  SUMMARY 
Economic Environment  1. Malaysia's strong overall economic performance during the period under review was led by 
pragmatic economic management and appropriately calibrated macroeconomic policies. The 
economy continued to undergo a significant external rebalancing due to a decline in external 
surpluses, while policies continue to ensure su stainable and inclusive growth in order to turn 
Malaysia into a high income country by 2020. Despit e a slowdown in total factor productivity (TFP) 
growth during 2008-12, Malaysia remains externally competitive with its comparative advantage 
seemingly shifting from electrical goods and electronics manufacturing towards processed commodities and natural gas.  
2. Malaysia's economy recovered rapidly from contraction in 2009 and moved towards more 
sustainable and moderate growth rates as, inter alia , the engines of growth shifted markedly from 
export-oriented manufacturing to domestic services. Robust domestic demand offset external weakness and fuelled growth at an annual aver age rate of 4.1% (2009-12). Malaysia's low 
inflation rate rose steeply from 2009 to 2011 due to temporary supply-side and cost-related 
factors, before falling in 2012 to below its 2010 level of 1.7%, one of the lowest in the Asia-Pacific region. In addition, its low official unemployment rate has further declined to 3% in 2012. 
3. During the period under review, a slightly accommodative monetary policy continued to 
strike the right balance between supporting growth  and keeping inflation in check. The benchmark 
interest rate at 3% has remained unchanged since May 2011, resisting a renewed trend among regional peers toward lowering rates. In 2011 an d 2012, the real effective exchange rate of the 
ringgit fluctuated narrowly after a strong apprec iation between September 2009 and April 2010. In 
line with its various capital markets and financial-sector development plans, Malaysia has relaxed or abolished several foreign-exchange policies. It s fiscal deficit declined gradually from 6.7% of 
GDP in 2009 to 4.5% in 2012 while Government debt is estimated to have risen to just below the 
self-imposed ceiling of 55% of GDP. Plans for fi scal consolidation, tax reform, and expenditure 
rationalization are under way. Several key initiatives have been implemented to improve public 
finances, including the resumption of subsidy rationalization. The long-awaited goods and services 
tax (GST) is to be implemented by April 2015. 
4. Despite a significant narrowing, the trade and current account balances remain in surplus. 
Malaysia's adequate foreign exchange reserves rose steadily between 2009 and 2011, after which 
they evolved around a relatively flat trend; as of 15 November 2013, they were US$136.7 billion 
(9.7 months of imports, 3.7 times the short-term external debt). External debt (short-term) rose 
steadily during the period under review (except for 2012). 
5. Malaysia's economy remains strongly outward-oriented, with trade in goods and services 
accounting for 162.4% of GDP. Although relatively well diversified, a considerable proportion of its foreign trade is increasingly intra-regional (Asia-Pacific); the share of commodities in total trade 
rose, but manufactures remain the main traded goods. 
6. Between 2008 and 2012 Malaysia's FDI stock rose by 58.8%, the same pace as its equally 
important stock of direct investment abroad, and co ntinued to be mainly directed to manufacturing 
and services activities. The EU and Singapore re mained the main FDI stockholders. FDI inflows 
eased somewhat in 2012, reflecting the uncertain  global economic outlook and the diminishing 
appeal of Malaysia as a base for labour-intensive industries.  
7. Malaysia has undertaken a major liberalization effort in its services sector since 2009, 
removing or reducing restrictions on foreign equity participation in a swathe of services 
subsectors. While a full list of remaining FDI caps across all sectors of the economy was not available, FDI limits were identified in the context of this Review in: fisheries, energy, 
telecommunications, telecommunications, and air and maritime transport. Foreign participation in 
public-private partnership projects may only be  considered in certain cases. The investment 
environment remains affected to a certain extent by policies favourable to the  bumiputera  
community and Malaysians in general. WT/TPR/S/292 • Malaysia 
 
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  Trade Policy Framework 
8. The direction of Malaysia's trade policy remains focused on ensuring that Malaysia becomes 
a self-reliant and industrialized nation by 2020. Emphasis is, inter alia , being placed on integrating 
Malaysian companies into global value chains and developing commercial ties with new markets. 
There have been no changes to the institutions responsible for trade policy formulation since 2010. 
Various new trade-related laws have entered into force: the Quarantine and Inspection Services Act, the Strategic Trade Act, the Competition Act and the Price Control and Anti-Profiteering Act. 
9. Malaysia continues to negotiate new regional trade agreements (RTAs) both bilaterally and 
together with its ASEAN partners. Seven new RTAs  entered into force for Malaysia during the 
review period. Three are ASEAN RTAs with third countries (Australia and New Zealand, India, and Korea), and four are bilateral agreements (with Chile, India, New Zealand, and Australia). Malaysia 
has signed and ratified the Trade Preferential Syst em of the Organization of the Islamic Conference 
(TPS-OIC) and the Developing Eight Preferential Tariff Arrangement (D8-PTA); these are expected to enter into force imminently. Malaysia is in the process of negotiating RTAs with Turkey, the 
European Union, and the European Free Trade Associ ation. It is a participant in the Trans-Pacific 
Partnership (TPP) negotiations as well as in the ASEAN Regional Economic Partnership (RCEP) negotiations. 
10. At the ASEAN level, efforts are focused on  achieving an ASEAN economic community 
by 2015; three new ASEAN agreements entered into force over the review period: the ASEAN Trade in Goods Agreement (ATIGA); the ASEAN Comprehensive Investment Agreement (ACIA) and the ASEAN Agreement on Customs in 2012. Addi tionally, there has been further liberalization 
within ASEAN with respect to trade in services, financial services, and air transport. ASEAN 
Regional Comprehensive Partnership negotiations are on-going. 
11. During the period under review, Malaysia was not involved in any new WTO dispute 
settlement cases either as complainant or respondent. It has maintained a consistent flow of 
notifications to the WTO, although notifications are outstanding in a few areas, while in a few others (e.g. tariff-rate quotas, domestic support in agriculture) there have been relatively long 
submission gaps. Reforms undertaken since 2010 to improve the business environment in Malaysia 
have included cutting processing times for dealing with customs permits; eliminating and simplifying licensing requirements; and reducing the time required for the approval of construction 
permits. Additionally, a National Policy on the Development and Implementa tion of Regulations, 
issued in 2013, requires federal government entities to follow certain steps in developing 
regulations affecting business, trade, and invest ment. A National Committee on Investments (NCI) 
was established in 2010 to assess and approve investment projects in a more swift and 
streamlined fashion, and in the same year the Malaysia Corporate Identity (MyCoID) scheme was 
introduced to simplify business interactio ns with multiple government agencies. 
Trade Policy Developments 
12. The tariff remains one of the main trade policy instruments, albeit a minor source of tax 
revenue (1.3% of total tax revenue in 2012). Following the adoption of the HS 2012 tariff nomenclature, Malaysia's customs tariff was streamlined by reducing the number of its tariff lines (by 9.3%). The tariff involves a multiplicity of rates (19 ad valorem , 19 specific, 11 compound, 
2 alternate duties), whose number remains virt ually unchanged since 2009. As a result of 
unilateral tariff cuts during the period under re view the average applied MFN tariff rate dropped 
from 7.4% in 2009 to 5.6% (2013). Tariff dispersion  was reduced, though tariff escalation remains 
pronounced. Tariff rates continue to range from zero to 90%, although non- ad valorem  tariffs tend 
to conceal much higher peak rates; 80% of ra tes were 10% or below in 2013. While more than 
80% of tariff rates are bound, the average gap appears to have risen to at least 10 percentage 
points between applied and bound MFN rates, thus allowing considerable leeway for raising applied 
tariffs, though this does not seem to have occurred during the period under review. The gap between the simple average applied MFN tariff rate  and the average preferential rate on imports 
from different preferential or FTA trading partners was also reduced.  
13. Trade facilitation was strengthened by, inter alia,  further shifting customs clearance from 
clearance-based controls to post-clearance audit controls; Malaysia's ease of trading across borders remains highly ranked in international comparisons.  WT/TPR/S/292 • Malaysia 
 
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  14. Import prohibitions are maintained mostly for national security, religious, and environmental 
reasons. A considerable portion of Malaysia's tariff lines remain subject to import licensing, most of which is non-automatic and continues being used as a tool of trade and industrial policy for, inter alia,  regulating the flow of imports and promot ing selected strategic industries. Although 
Malaysia's recourse to anti-dumping action dropped markedly, with no case initiated from 2007 
to 2011, in 2012 investigations were launched on imports of steel wire rod, biaxially oriented polypropylene film, and hot rolled coils, virtually all of Asian origin.  
15. Export taxes (1.5% of total tax revenue in 2012) and/or restrictions, which are applied to 
certain goods (e.g. timber, crude palm oil), continue to, inter alia,  discourage exports of certain 
commodities and essential goods and reduce thei r domestic prices, thereby ensuring adequate 
domestic supplies and assisting downstream proce ssing of the products concerned. Exports of 
price-controlled essential goods (i.e. wheat flour,  diesel, petrol RON 95, liquefied petroleum gas, 
sugar, and cooking oil), four of which are subsidized, are prohibited unless approval is granted. 
Import duty exemptions or drawbacks for intermedia te goods used in the production of exports are 
in place so that the import duties do not feed through to become implicit taxes on exports. 
Support is available for exports of certain fr esh and dried fruits, fresh and dried flowers, 
ornamental plants and ornamental fish, and manufactures, in the form of statutory income tax 
exemption ranging from 10% to 50% of th e value of increased exports depending, inter alia , on 
the activity, value-added and/or ownership. Similar exemption of statutory income tax equivalent to 50% of the value of increased export is availa ble to companies in selected services sectors. 
Other support measures remain in place, such as export processing zones involving local content 
requirements (since 2011), concessionary credits, insurance, and guarantees, as well as 
government-sponsored promotion and marketing assistance. 
16. Measures involving grants, tax concessions, and low-interest loans continue to support 
production and trade of various agricultural and manufactured products, and encourage SMEs, 
R&D, and environmental-protection activities. The Malaysian economy remains one of the most 
highly subsidized in the region and the world. A reform aimed at rationalizing the subsidies regime 
on gasoline, cooking gas, electricity, and road tolls was launched but has accomplished little so 
far; renewed emphasis was placed on these efforts in October 2013. 
17. Standards improvement and development activiti es remain among Malaysia's priorities for 
achieving developed-nation status by 2020. During the period under review the share of 
compulsory Malaysian standards and standards aligned with international standards continued to 
rise. Regulatory and institutional improvements were undertaken in the area of SPS. Further emphasis has been placed, inter alia,  on halal certification and biosafety issues. 
18. State involvement in the economy persists in numerous areas (e.g. oil, gas, key strategic 
utilities, and services) although competition challenges for government-linked companies (GLCs) were intensified due to several developments. Efforts to improve their productivity seem to have 
borne fruit in some cases. Preferential government procurement procedures and expanded 
countertrade/offset requirements continue to be used as an instrument of industrial policy to favour locally owned businesses; international tenders are invited only if goods and services are not available locally. GLCs, which are not governed  by the public sector's procurement rules and 
regulations, are encouraged to purchase from locally owned businesses. Malaysia became an 
observer to the WTO Agreement on Government Procurement in 2012, and efforts were undertaken to improve transparency and "integ rity pacts" in its procurement procedures. 
19. During the period under review significant changes were brought to the legal and 
institutional framework governing competition policy, which also covers GLCs, but not certain anti-competitive practices, agreements or acti vities covered by their individual legislation 
(e.g. energy and communications). Price and supply controls over essential goods and services 
were reinforced, while sugar price subsidies were  abolished and those on petrol were reduced. 
Consumer protection was strengthened in several areas (advertisements, personal data protection, credit sales, consumer redress). Substantial progress was made in further improving the 
regulatory framework of corporate governance by, inter alia,  raising standards in this area. 
20. Malaysia strengthened its intellectual property  regime through significant amendments to its 
patent, industrial designs, copyright and trade ma rk laws and/or regulations, and expanding its 
international commitments. Its proactive enforcement approach was intensified with new initiatives 
(e.g. Basket of Brands (BOB) scheme). WT/TPR/S/292 • Malaysia 
 
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  Sectoral Policy Developments 
21. The contribution of agriculture (including forestry and fisheries) remains at around one tenth 
of GDP. However, continuous adoption of new te chnologies has enhanced its TFP growth, while the 
self-sufficiency ratio for major agricultural prod ucts remained largely stable during the review 
period. The new agricultural policy supports th e development of the agri-food industry with 
emphasis being placed, inter alia,  on promoting biotechnology as well as high value agriculture. 
Malaysia continues to maintain a relatively liberal trade regime for agriculture with generally low 
applied MFN tariffs averaging 2.9% (WTO definition) in 2013. However, peak non- ad valorem  tariff 
rates maintained almost exclusively on certain agricultural products continue to allow for higher tariff protection ( ad valorem  equivalents up to 1,439.2% for alcoholic beverages, tobacco refuse). 
Tariff-rate quotas related to multilateral agricultural market-access commitments with in-quota 
rates ranging from zero (round cabbages) to 25%, and out-of-quota rates from 20% to 90% 
(round cabbages), remain in place. The Government also implements measures to support the domestic processing of certain agricultural prod ucts (e.g. through non-automatic export licensing 
and export duties) as well as to promote exports (e.g. through corporate tax relief); export duties 
on crude palm oil were considerably reduced to  improve its export competitiveness and reduce 
domestic stocks. Malaysia continues to provide increasing amounts of product-specific support 
(i.e. price support to paddy rice) and general support (e.g. fertilizer subsidies, and soft loans) 
mainly focused on rice-related activities. Rice is a strategic crop for which the authorities revised their approach by ensuring the availability, accessibility, and affordability rather than self-sufficiency. It remains the sole item subjec t to the import monopoly of the firm Padiberas 
Nasional Berhad (BERNAS), non-automatic import/export licensing, and price and supply controls. 
Fish production targets have been largely exceeded, despite the use of precautionary measures, such as the limitation on licences issue. A fisheries input control regime and certain resource 
enhancement and environmental-sustainability measures are in place. Domestic support for 
fisheries has included additional diesel fuel subsidies (until end May 2011 for trawlers above 70 GRT). 
22. The contribution of mining (including fuels) and quarrying to GDP dropped slightly to 10.4% 
in 2012. Mining products remain subject to relatively high tariff protection, ranging from zero to 50% (portland cement), export licensing, and export taxes, thereby assisting downstream processing. 
23. During the review period, efforts were made to  reduce Malaysia's dependence on oil and gas 
and to cope with rising energy demand by increasing the share of renewable sources in the total primary energy supply. However, in spite of these efforts, the contribution of renewable energy 
remains negligible. Some action was also taken to improve energy efficiency. Energy subsidization 
for all consumers remains a major and long-standing fiscal, budgetary, developmental, environmental, and thereby political issue. State involvement in the oil, gas and electricity sectors 
persists, with government-linked company PETRONAS remaining the biggest contributor to the 
government budget. It allows, inter alia,  for subsidization of power generators through a 
government-imposed low natural gas price, a pass-th rough element that is intended to benefit the 
end users. Furthermore, electricity tariffs vary depending on the category of users and their 
consumption, thus allowing for cross-subsidization among different consumer groups; for example, 
average tariffs for commercial and agricultural activities are higher than those charged to industrial and residential consumers.  
24. Whereas manufacturing's share of GDP decreased slightly over the review period, its share 
of employment remained relatively stable. Manufacturing ranks 3
rd behind construction and 
services in terms of TFP growth. With the notable exception of automotive products, 
manufacturing remains relatively open to both trade and foreign investment. Since 2009, 
Malaysia's average applied MFN tariff on imports of industrial products has dropped from 8% to 6.2% (2013) due to nomenclature changes. This level is more than double the average tariff level affecting agricultural products (WTO definiti on). Preferential treatment for locally produced 
goods in government procurement contracts, ex port licensing and export taxes on principal 
commodities, corporate tax exemptions for exports, and several tax and non-tax incentives for production and trade continue to support manufacturing activities. The automotive sector remains 
protected by an average applied MFN tariff of 17 .3%, the highest of all HS sections, although 
tariffs on imports from ASEAN member countries were reduced to zero in 2010. Non-tariff measures such as the gazetted price system an d the import licensing system of "approved 
permits" remain in place; the latter should be eliminated in the near future (2015, 2020). In WT/TPR/S/292 • Malaysia 
 
- 11 - 
 
  addition, an array of tax measures are still in use (e.g., high excise duties affecting 
disproportionately large vehicles, targeted excise duty exemption on sales of "national cars", and 
reduction on domestically assembled four-wheel-d rive vehicles, and enhanced tax exemptions on 
statutory income from exports), as well as non-tax measures (soft loans and grants) within the 
framework of the National Automotive Policy. 
25. The services sector continues to be a very dynamic segment of the economy, with annual 
growth averaging 5.9% over 2009-12. In 2012, it accounted for just over 50% of GDP and 
employment, and attracted the biggest share of  the economy's approved investments. The 
Government has continued to autonomously liberalize foreign equity restrictions in a swathe of services sectors; in 2012 it commenced implementati on of partial or complete lifting of foreign 
equity restrictions in 17 services subsectors, under 6 sectors: professional services; 
communications services; distribution services; educational services; environmental services; and 
health-related and social services. Over the review period Malaysia has undertaken comprehensive modernization and streamlining of its financial services legislation. New laws have removed the 
caps on foreign direct investment in the bankin g and insurance sectors. The issuing of insurance 
and banking licences is now based on prudential and the "best interest of Malaysia" criteria. Malaysia is seeking to promote itself as a centre for Islamic finance, health care, and education 
services, as well as a transportation hub for both air transport and shipping.  
Outlook 26. Malaysia's economic fundamentals remain, by and large, sound. Despite its impressive 
rebound from the global financial crisis, Malaysia's economy remains vulnerable to exogenous 
shocks to global growth or risk aversion through international trade, commodity prices, and 
financial channels. Equitable and sustainable grow th depends on implementing diversification and 
improved total factor productivity - enhancing structural reforms especially those aimed at 
addressing fiscal consolidation, tax reform and expenditure rationalization concerns. These and 
related reforms would increase the flexibility of the Malaysian economy and its ability to respond to growing external competition. 
 WT/TPR/S/292 • Malaysia 
 
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  1  ECONOMIC ENVIRONMENT 
1.1  Overview 1.1.  Malaysia's trade and investment policies during the period under review have been 
implemented against a background of strong overall economic performance that reflects pragmatic 
economic management in the face of large external shocks, with macroeconomic policies being 
appropriately calibrated to the outlook and risks.
1 The economy experienced significant 
rebalancing, reflecting surging domestic demand and weak external demand. Total factor 
productivity has grown more slowly (section 1.2), but Malaysia remains well positioned in terms of 
ease of doing business (section 2.5.1) and exte rnally competitive although its competitiveness 
seems to be shifting towards processed commoditi es and natural gas and away from electrical 
goods and electronics manufacturing.2 Malaysia is the 11th leading exporter and importer of goods 
and commercial services in the Asia-Pacific region. There has been a rise in the share of 
commodities in its total trade, although manufactures remain predominant.3 An increasing share of 
its foreign trade is intra-regional (Asia-Pacific), although its exports remain relatively well 
diversified.  
1.2.  Despite Malaysia's strong economic fundamentals and impressive performance during the 
period under review, there are weaknesses that pose downside risks to its economic outlook. 
Action is being taken to address these.4 According to the IMF, endogenous risks relate, inter alia,  
to: elevated housing prices and growing househol d debt, possibly affecting the financial sector 
(section 4.7)5; slower-than-expected implementation of diversification and productivity-enhancing 
structural reforms (section 1.4.2); the scarcity of skilled workers; high redundancy costs; and the 
need to foster technological readiness and greater competition in (final) product markets. 
Exogenous risks could include shocks to global growth or risk aversion that could impact Malaysia through trade, commodity prices, and financial channels, and could trigger capital flow volatility; 
nevertheless, the continued strength of intra- ASEAN trade seems to provide some resilience 
against these risks.  
1.2  Recent Economic Performance  
1.3.  Malaysia's economy recovered rapidly from contraction in 2009 as the drivers of economic 
growth shifted from export-oriented manufactu ring to domestic services (Table 1.1).
6 Between 
2009 and 2012 the economy grew at an annual average rate of 4.1%.7 In 2012 and early 2013, 
robust domestic demand offset weak external demand and fuelled growth.8 Private and public 
investment has been a key driver of the expansion, supported by favourable financing conditions 
and the catalytic effects of large projects und er the Economic Transformation Program (ETP) 
(section 2.3), particularly in oil, gas, and infrastructure. Consumption growth has also been 
vigorous (Table 1.1), supported by a strong labour market, credit to households, and government 
transfers. The robust pace of economic activity  is expected to continue in 2013 supported by 
strong investment growth, supportive fiscal and mo netary policies, higher household income due 
to tight/healthy labour market conditions, and mo dest improvement in the export sector. On the 
supply side, all the major economic sectors are expected to record continued expansion supported by the services and manufacturing sectors. The economy is expected to expand between 4.5% 
                                               
1 IMF (2013b).  
2 According to the World Economic Forum Global Competitiveness Report 2013-2014  in 2013 Malaysia 
ranked 24th (out of 148 economies) up from 25th (out of 144 countries) the previous year. The Institute for 
Management Development (IMD) World Competitiveness Yearbook 2013  ranked Malaysia 15th (out of 
60 economies) in 2013 compared to 14th position (out of 59 countries) the previous year, ahead of Australia, 
the United Kingdom, China, Korea (Rep. of), and Japan; Malaysia achieved top ten positions in two of the four 
factors assessed; Business Efficiency (4th) and Economic Performance (7th) (Malaysia Productivity Corporation 
online information. Viewed at: http://www.mpc.gov.my/home/?sstr_lang= en&cont=ds&id=7&item=d7&s_item=7i3&t=3 ). Malaysia 
Productivity Corporation  (2013b); World Bank (2013b); and Gil Sander et al. (2013). 
3 UNESCAP (2012). 
4 IMF (2013b); and Gil Sander et al. (2013). 
5 The Government is putting in place measures to in crease the supply of more affordable housing, and 
the real property gains tax rate was further raised on 1 January 2013 (IMF, 2013b). 
6 World Bank (2010).  
7 Achieving Malaysia's Vision 2020 goal of high-income status requires average growth of 6% during the 
10th Malaysia Plan period (section 2.3) (World Bank, 2010). 
8 IMF (2013b); and Gil Sander et al. (2013). WT/TPR/S/292 • Malaysia 
 
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  and 5% in 2013; in 2014, in tandem with an improved global economic outlook, the domestic 
economy is projected to grow at a stronger pace of 5% to 5.5%.9 Medium-term growth prospects 
are good in the absence of new external shocks, especially more pronounced changes in commodities prices.  
Table 1.1 Selected macroeconomic indicators, 2009-12  
  2009 2010 2011 2012 
National accounts (Percentage change, unless otherwise indicated) 
Real GDP (at 2005 prices) -1.5  7.4  5.1  5.6  
Consumption 1.4  6.2  8.6  7.1  
Private consumption 0.6  6.9  6.8  7.7  
Government consumption 4.9  3.4  15.8  5.1  
Gross fixed capital formation -2.7  11.9  6.2  19.9  
Exports of goods and non-factor services -10.9  11.1  4.6  -0.1  
Imports of goods and non-factor services -12.7  15.6  6.1  4.7  
XGS/GDP (%) (at current market price) 91.4  93.3  91.6  87.1  
MGS/GDP (%) (at current market price) 71.1  76.3  75.2  75.3  
Unemployment rate (%) 3.7  3.3  3.1  3.0  
Productivity (Percentage change) 
Labour productivity -2.1  4.8  1.8  2.0  
Prices and interest rates (%) 
Inflation (CPI, %age change) 0.6 1.7 3.2 1.6 
Fixed 3-months deposit rate 2.08  2.50  2.91  2.98  
Savings deposit rate 0.93  0.94  1.08  1.04  
Exchange rate     
RM/US$ (annual average) 3.52  3.22  3.06  3.09  
Real effective exchange rate (%age change) -1.6  5.7  -2.1  1.8  
Nominal effective exchange rate (%age 
change) -1.2  6.7  -1.8  3.0  
 (% of GDP, unless otherwise indicated) 
Overall Government balance -6.7  -5.4  -4.8  -4.5  
Current Government balance 0.2  1.0  0.3  0.3  
Current revenue 22.3  20.0  21.0  22.1  
Tax revenue 14.9  13.7  15.3  16.1  
Current expenditure 22.0  19.0  20.6  21.8  
Development expenditure, net 6.9  6.4  5.1  4.7  
Government total debt (end-period) 50.8  51.1  51.6  53.3  
Saving and investment      
Gross national savings 33.4  34.2  34.9  31.9  
Gross domestic investment (gross fixed capital 
formation) 17.8  23.3  23.3  25.8  
Savings-investment gap 15.5  10.9  11.6  6.1  
External sector     
Current account balance  15.5  10.9  11.6  6.1  
Net merchandise trade  19.7  17.2  17.1  13.3  
Merchandise exports 77.6  80.4  79.1  74.7  
Merchandise imports 57.9  63.3  62.0  61.4  
Services balance 0.6  -0.2  -0.7  -1.5  
Capital account -0.0  -0.0  -0.0  0.0  
Financial account -11.2  -2.5  2.6  -2.4  
Direct investment -3.1  -1.8  -1.1  -2.3  
Balance-of-payments  1.9  -0.3  10.7  0.4  
Merchandise exports (%age change in RM) -16.5  16.0  9.1  0.5  
Merchandise imports (%age change in RM) -16.2  22.3  8.7  5.4  
Service exports (%age change in RM) -4.7  4.2  7.5  5.8  
Service imports (%age change in RM) -7.4  10.3  12.0  12.1  
                                               
9 The 2014 Budget Speech  introducing the Supply Bill (2014), "Strengthening economic resilience, 
accelerating transformation and fulfilling promises", 25 October 2013. Viewed at: http://www.fmm.org.my/upload/speech.pdf .  WT/TPR/S/292 • Malaysia 
 
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    2009 2010 2011 2012 
Gross official reserves (US$ billion, 
end-period) 94.0  102.0  138.4  138.3  
in months of following year's imports 6.5  5.9  7.2  7.2a  
Total external debt (US$ billion; end-period) 68.0  73.6 81.0 82.6 
of which short term 22.6  25.8 32.7 30.4 
Debt service ratiob 6.5  7.6  10.4  10.1  
a  Based on 2012 import data. 
b Per cent of exports of goods and services. 
Source:  Bank Negara Malaysia online information; data provided by the Malaysian authorities; and IMF, 
International Financial Statistics. 
1.4.  Since 2009, changes in the overall sectoral pattern of Malaysia's GDP and employment have 
been relatively minor, with services accounting for about one half of economic activity followed by 
manufacturing at about one quarter (Table 1.2, section 4.7). From 2008 to 2012, total factor productivity (TFP) growth slowed to 0.76% (2.12%  in 2000-07) and its contribution to GDP growth 
eased to 18% (38% in 2000-07) due to slower output growth, particularly weaker export 
performance affected by the global economic slowdown.
10 The deterioration in TFP growth has 
been most pronounced in the mining sector (section 4.4). A recent revealed comparative 
advantage analysis shows that Malaysia's competitiveness is moving towards processed 
commodities and natural gas and away fr om electrical and electronics (E&E).11 Malaysia's 
participation in Global Value Chains (GVCs) is quite high as compared to other top exporting economies, and its domestic value added in exports has risen considerably (sections 2.3 
and 4.6).
12 
Table 1.2 Basic economic and social indicators, 2009-12  
 2009 2010 2011 2012 
Real GDP at market price (US$ billion, 2005 
prices) 178,710.6 210,069.8 232,467.4 243,288.9 
Current GDP at market price (US$ billion) 202,251.4 247,533.5 289,037.6 304,725.7 
GDP per capita at current market price (US$) 7,202.2 8,658.3 9,979.2 10,387.1 
 (Annual percentage change) 
GDP by economic activity at constant 
2005 prices     
Agriculture 0.1 2.4 5.8 1.0 
Mining and quarrying -6.5 -0.3 -5.5 1.4 
Manufacturing -9.0 11.9 4.7 4.8 
Construction 6.2 11.4 4.7 18.1 
Services 2.9 7.4 7.0 6.4 
Electricity, gas, and water 2.0 7.7 3.4 4.3 
Wholesale and retail trade 1.7 8.3 7.1 4.8 
Restaurants and hotels 4.5 7.0 6.0 5.4 
Transport, storage, and communication 1.3 8.4 6.5 7.0 
Finance and insurance 4.4 8.2 6.8 7.8 
Real estate and business activities 3.6 7.6 5.3 7.2 
Government services 3.4 5.9 12.3 9.5 
Other services 3.8 4.4 4.9 3.9 
 (%) 
GDP by economic activities at current 
prices     
Agriculture 9.2 10.4 11.8 10.1 
Mining and quarrying 11.4 10.9 10.4 10.4 
                                               
10 The authorities indicated that in tandem with the disruption to domestic economic growth in 2009, the 
overall performance of the TFP shrank; in 2009, the TFP growth shrank by 4.8%, the first contraction since 2001. According to the Malaysia Productivity Corporation, during 2008-12 the country's TFP growth surpassed that of Indonesia, Thailand, Japan, the United States, and Australia  (Malaysia Productivity 
Corporation, 2013b).  
11 The revealed comparative advantage is an index used for calculating the relative advantage or 
disadvantage of a certain country in a certain class of goods or services as evidenced by trade flows 
(Gil Sander et al., 2013). 
12 For more information on this matter see UNCTAD (2013b); and EIU (2012a).  WT/TPR/S/292 • Malaysia 
 
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   2009 2010 2011 2012 
Manufacturing 23.8 24.5 24.3 24.2 
Construction 3.3 3.4 3.4 3.9 
Services 51.3 49.9 49.1 50.4 
Electricity, gas, and water 2.5 2.4 2.3 2.3 
Wholesale and retail trade 13.5 13.4 13.6 13.6 
Restaurants and hotels 2.7 2.7 2.7 2.7 
Transport, storage, and communication 6.6 6.4 6.3 6.3 
Finance and insurance 8.1 7.7 7.3 7.5 
Real estate and business activities 5.2 5.0 4.9 5.0 
Government services 7.9 7.5 7.7 8.5 
Other services 4.9 4.7 4.5 4.4 
Other (import duties) 1.0 1.0 1.0 1.1 
Share of sector in  total employment     
Agriculture 11.9 11.6 11.3 11.1 
Mining and quarrying 0.4 0.4 0.3 0.3 
Manufacturing 27.6 28.3 28.6 28.9 
Construction 6.6 6.4 6.3 6.2 
Services 53.5 53.3 53.4 53.5 
Electricity, gas and water 0.8 0.8 0.8 0.8 
Wholesale and retail trade; hotels and 
restaurants 18.4 18.7 19.1 19.5 
Transport, storage, and communication 5.8 5.7 5.8 5.8 
Finance, insurance, real estate, and business 7.1 7.0 7.0 6.9 
Government services 10.7 10.4 10.2 10.0 
Other services 10.6 10.5 10.5 10.5 
Source:  Bank Negara Malaysia online information; data provided by the Malaysian authorities; and IMF, 
International Financial Statistics. 
1.5.  Malaysia's already low rate of unemployment further declined to 3% in 2012 and 3.1% 
in 2013 (Table 1.1). In the first quarter of 2013, registered foreign workers numbered 2.1 million 
(about 16% of total employment, section 1.4.2.5), and had been mostly illegal workers. The 
informal sector, which comprised 1 million workers (8.2% of total employment) in 2012, helps to keep official unemployment rates low by absorbing unemployed persons, and is estimated to 
contribute as much as 13% of GDP, a contribution seemingly taken into account in the compilation 
of GDP; in 2012, the services sector recorded the highest number of informal workers (59.4%).
13  
1.6.  Inflation rose sharply from 2009 to 2011 due to temporary supply-side and cost-related 
factors, including higher energy and commodity  prices, upward adjustments to administered 
prices, and disruptions to domestic food supplies, but in 2012 it eased back, slightly below its 2010 
level of 1.7%, amongst the lowest in the Asia-Pacific region (Table 1.1). Explanatory factors were benign supply-side conditions including a decline in domestic fuel prices and moderation in food 
prices, despite domestic demand pressures such as  strong credit growth; a positive output gap; 
and rising wages in domestically oriented industries.
14 The Government's network of price controls 
(including subsidies) for major household goods (food and non-alcoholic beverages), fuels, and 
public utilities play a major part in keeping inflation rates low (sections 3.4.2.2 and 3.4.4.2). More 
than 30% of the goods basket in Malaysia's Consumer Price Index consists of food and non-alcoholic beverages; housing, water, electricity, gas, and other fuels account for 22.6% of total weight, and transport for 14.9%. This system has shielded both households and firms from 
realizing the full price effect of these goods, thus protecting their purchasing power.
15 Since 2010, 
headline inflation has not averaged higher than  the upper bound of the forecast range. The 
expected strengthening of the ringgit against the U.S. dollar, together with moderating global fuel 
and food prices, should help to contain inflationary pressures in 2013.16 According to the 
authorities, headline inflation was expected to remain modest in 2013, most likely to average the lower end of the 2%-3% forecast range announced earlier in the year. However, the possibility of 
a gradual withdrawal of fuel and food subsidies and the planned adoption of a goods and services 
tax (GST) (section 1.4.2.1) could temporarily put upward pressure on consumer prices.  
                                               
13 Department of Statistics (2013); Baharudin et al. (2011).  
14 IMF (2012 and 2013b); and Gil Sander et al. (2013). 
15 Gil Sander et al. (2013).  
16 EIU (2013a). WT/TPR/S/292 • Malaysia 
 
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  1.3  Balance of payments 
1.7.  Despite a significant narrowing of Malaysia's current account surplus in recent years, 
reflecting surging domestic demand, weak extern al demand, and strong imports of capital goods 
(Table 1.3), according to the IMF, Malaysia's external position is stronger than warranted by 
medium-term fundamentals and desirable policies. It reflects structural factors, including 
insufficient social safety nets, investment bottlenecks, and large exports of non-renewable 
resources (e.g. hydrocarbons).17 Between 2009 and 2012, the trade surplus as a share of GDP 
moved from 19.7% to 13.3% (Tables 1.1 and 1.3).  
Table 1.3 Balance of payments, 2009-12  
(RM million) 
 2009 2010 2011 2012 
Current account balance 110,727 87,183 102,426 57,348 
Goods and services balance 144,529 135,306 145,293 111,611 
Goods balance 140,355 136,751 151,565 125,614 
Exports 552,920 641,135 699,591 703,152 
Imports 412,565 504,384 548,026 577,538 
Services balance 4,173 -1,444 -6,272 -14,003 
Exports 98,751 102,900 110,630 117,007 
Transportation 16,472 15,696 15,482 13,665 
Travel 54,995 58,350 60,146 62,548 
Imports 94,578 104,344 116,902 131,010 
Transportation 32,290 38,087 40,546 41,677 
Travel 22,827 26,733 31,187 35,654 
Income balance -14,215 -26,333 -21,806 -36,024 
Compensation of employees -1,463 -2,082 -2,331 -3,040 
Investment income -12,752 -24,251 -19,475 -32,985 
Current transfers (net) -19,587 -21,790 -21,061 -18,239 
Capital and financial account -80,224 -20,057 23,132 -22,878 
Capital account (net) -51 -111 -133 159 
Financial account (net) -80,173 -19,946 23,265 -23,037 
Direct investment -22,315 -13,977 -9,337 -21,748 
Malaysia's direct investment abroad -27,436 -43,160 -46,662 -52,864 
Direct investment in Malaysia 5,121 29,183 37,325 31,116 
Portfolio investment -1,781 48,467 26,139 58,388 
Assets -22,177 -23,176 -18,522 -21,455 
Liabilities 20,396 71,643 44,661 79,843 
Financial derivatives 2,369 -698 -76 954 
Other investment -58,447 -53,738 6,539 -60,632 
Public sector -182 119 -1,337 -1,702 
Assets 3,366 2,878 1,430 1,882 
Liabilities 3,547 2,759 2,767 3,584 
Private sector -58,265 -53,856 7,876 -58,930 
Net errors and omissions -16,671 -69,754 -30,876 -30,597 
Overall balance of payments 13,831 -2,628 94,682 3,873 
Source: Department of Statistics online information. Viewed at: 
http://www.statistics.gov.my/portal/index.php?lang=en  [24.07.13]. 
1.8.  According to the IMF, Malaysia's international reserves remain adequate (Table 1.1).18 As of 
15 November 2013, they were US$136.7 billion (9.7 months of imports, 3.7 times the short-term 
external debt).19  
1.9.  Malaysia's external debt (short-term) rose  from US$22.6 billion (32.6% of GDP) in 2009 to a 
peak of US$32.7 billion (29.1% of GDP) in 2011 (Table  1.1). Since then it has declined slightly but 
rose to US$36 billion (28.8% of GDP) by the first half of 2013; the authorities indicated that this 
                                               
17 IMF (2013b). 
18 IMF (2013b). 
19 Bank Negara Malaysia online data. Viewed at: 
http://www.bnm.gov.my/files/publication/msb/2013/6/i_en.pdf .  WT/TPR/S/292 • Malaysia 
 
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  rise reflected higher medium- and long-term extern al debt following a net drawdown of external 
borrowing by the non-bank private sector for investment purposes as well as higher short-term external debt arising from net drawdown of inte rbank borrowing, as well as the weakening of the 
ringgit against regional and major currencies. Nevertheless, according to the IMF, it is expected to 
remain on a steady downward trend over the medium-term reflecting sustained current account 
surpluses and some shift towards domestic debt.
20 The debt-service-to-exports ratio has increased 
steadily since 2009, but remains comparatively low (Table 1.1).  
1.4  Key Policy Developments 
1.4.1  Macroeconomic policies  1.10.  According to the IMF, Bank Negara Malaysia (BNM)'s slightly accommodative monetary 
policy strikes the right balance between support ing growth and keeping inflation in check.
21 As one 
of the first central banks in the region to start a policy tightening cycle after the 2008 −09 global 
crisis, BNM has kept its benchmark interest rate at 3% since May 2011, resisting a renewed trend among regional peers toward lowering rates. A number of macro-prudential regulations 
(section 4.7) were adopted in the course of 2010 and 2013 to curb the rise in private sector credit, 
in particular to alleviate household debt, and to prevent the build-up of risks to financial stability.
22 
1.11.  Malaysia operates a managed float of the ringgit against an undisclosed trade -weighted 
basket of currencies.23 In 2011 and 2012, the real effective exch ange rate of the ringgit fluctuated 
narrowly after strong appreciation between September 2009 and April 2010.24 Malaysia has been 
exposed to volatile capital flows, a standard feat ure of emerging markets, and this is likely to 
continue in the near term. Malaysia retains multiple layers of buffer against volatile capital flows. 
Its policy response so far, characterized by tw o-way exchange rate flexibility while smoothing 
excessive exchange rate fluctuations, has been successful. Its sound banking system and liquid 
capital markets facilitate the absorption of flows, while a stable core of domestic institutional 
investors and comfortable levels of official international reserves provide additional buffers against any volatility in external demand for domestic securities.
25  
1.12.  In line with various capital markets and financial-sector development plans 
(section 4.7.2.1), Malaysia has relaxed or abolished several foreign-exchange policies.26 Since 
18 August 2010, exporters and importers have be en free to determine the currency of settlement 
(except the currency of Israel) for international trade in goods and services. Since January 2012, 
licensed onshore banks have been permitted to trade one foreign currency directly against another 
with any resident. As from June 2013, non-residents have been permitted to undertake anticipatory hedging involving ringgit for current account transactions with onshore banks 
(section 4.7.2.2). The ban on offshore trading of  the ringgit was the last substantial measure of 
the September 1998 exchange controls remaining in place in April 2013.
27  
1.13.  Malaysia's fiscal deficit declined gradually from 6.7% of GDP in 2009 to 4.5% in 2012 
(Table 1.1). In 2012, spending exceeded origin al budget projections by about 2% of GDP, 
particularly in wages, pensions, fuel subsidies, and transfers to target groups; however, this overspending was offset by higher-than-targeted revenues, lower development expenditures, and a higher-than-expected nominal GDP figure.
28 The 2013 and 2014 Budgets envisage a further 
                                               
20 IMF (2013b). 
21 Should downside risks to the growth outlook mate rialize, BNM has ample room to cut rates and allow 
the exchange rate to act as a shock absorber. However,  the Government's relatively high debt level affords 
limited space for a fiscal response in a downside scenario (IMF, 2013b). 
22 Gil Sander et al. (2013).  
23 IMF (2013b). 
24 The IMF's Consultative Group on Exchange Rate Issues (CGER) – and Exte rnal Balance Assessment 
(EBA)-based estimates suggest that the REER is undervalued relative to the level consistent with fundamentals and desirable policies, but these me thodologies do not appear to fully capture Malaysia's structural 
characteristics (IMF, 2013b). 
25 IMF (2013b); and Gil Sander et al. (2013). 
26 EIU (2012a).  
27 The Malaysian authorities view remaining exchange control regulations as prudential in nature and 
necessary to ensure the availability of adequate information on the settlement of payments and receipts as 
part of the monitoring mechanism on capital flows (IMF, 2013b).  
28 IMF (2013b); and Gil Sander et al. (2013). WT/TPR/S/292 • Malaysia 
 
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  decline in the fiscal deficit to 4% and 3.5% of GDP respectively, consistent with the Government's 
plan to reduce its deficit to 3% of GDP by 2015. Government debt is estimated to have risen to 53.3% of GDP at end 2012, just below the Government's self-imposed ceiling of 55%, reflecting, inter alia , declining growth and oil prices. The authorities are committed to bringing debt down to 
about 48% of GDP by 2017, through their fiscal consolidation plan (section 1.4.2.1). 
1.4.2  Structural policies 1.14.  According to the IMF, the sustained impl ementation of broad structural reforms is a 
prerequisite for turning Malaysia into a high income nation by 2020.
29 
1.4.2.1  Fiscal reform/consolidation 1.15.  During the period under review, tax reform has involved: the modernization and 
streamlining of the petroleum income tax system on upstream petroleum companies (2010); the 
reduction of top marginal individual income tax rate (2010, 2013); the re-imposition (2010) and 
increase (2012, 2013) of the real property (estat e) gains tax (RPGT); the increase of the service 
tax rate (2011); the reduction of income tax rates on cooperative societies (2013); and the 
introduction of income tax treatment for limited liability partnership and business trusts. Malaysia 
made paying taxes costlier for firms by reintroducing the RPGT but made tax compliance easier and less costly by improving electronic tax paym ent systems and the availability of appropriate 
and easier-access software.
30 To modernize and streamline the tax administration system, as 
from 2010 the self-assessment system was implemented for companies, sole proprietors, partnerships, cooperatives, and salaried groups, and income tax assessment has been on a current year basis.
31 
1.16.  The authorities are committed to fiscal consolidation, tax reform and expenditure 
rationalization.32 Several key initiatives have been implemented to improve public finances, 
including the establishment of a Fiscal Policy Committee (FPC) (mid-June 2013) supported by a 
Fiscal Policy Office within the Ministry of Finance. Subsidy rationalization (sections 3.4.2.2 and 4.5) 
has resumed since the last price hike in December 2010, by reducing fuel subsidy by RM 0.20 per litre (as from 3 September 2013), and abolishing the subsidy on sugar (as from 26 October 2013), 
while cash transfers were given to targeted low-income and vulnerable groups. Ongoing measures 
to rationalize spending, include the optimal use of Government assets; intensive use of information technology (IT) to deliver public services; controlling the size of the civil service; cutting back on non-critical spending; and promoting greater inter-agency cooperation to implement programmes. 
Measures to enhance revenue collection continue to focus on broadening the tax base, improving 
tax administration, promoting higher compliance, and intensifying tax education. Under the 2014 Budget the long-awaited Goods and Services Tax (GST) is to be implemented in 
April 2015 at 6%, thus broadening the tax base, promoting overall tax compliance, and bringing in 
the informal sector (section 1.2) into the tax; the sales tax and service tax are to be abolished.
33 
Audits, enforcement, and investigations are being intensified. The Government has been vigilant 
against tax evasion, under-declaration of customs duties, and money laundering. 
1.17.  To address long-term spending pressures the authorities intend to undertake reforms to the 
public pension scheme, to housing and student loan programmes, and to the civil service. According to the IMF, fiscal consolidation must be  underpinned by a concrete plan, taking account, 
inter alia,  of the potential long-term decline in oil-related revenue and increases in age-related 
government spending. It should be complemented  by reforms to: broaden the revenue base away 
from volatile oil- and gas-related receipts; and boost the efficiency and inclusiveness of 
government spending, including through continued gradual reform of universal fuel subsidies, 
accompanied by targeted support measures for vulnerable groups.
34 At the same time the IMF 
                                               
29 IMF (2013b). 
30 According to the World Bank, in 2012, Malaysia ranked 15th (out of 185 economies) in paying taxes, 
up from 25th the previous year (World Bank, 2013b).   
31 MIDA online information. Viewed at: http://www.mida.gov.my/env 3/index.php?page=taxation .  
32 IMF (2013b). 
33 The 2014 Budget Speech  introducing the Supply Bill (2014), "Strengthening economic resilience, 
accelerating transformation and fulfilling promises", 25 October 2013. Viewed at: 
http://www.fmm.org.my/upload/speech.pdf ; and Treasury online information. Viewed at: 
www.treasury.gov.my/data/er/chapter4.pdf .  
34 IMF (2013b). WT/TPR/S/292 • Malaysia 
 
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  underlines the need for streamlining fiscal incentives for investment, with their budgetary costs 
made more transparent. 
1.4.2.2  Privatization 1.18.  Despite persistent wide-ranging direct and indirect state involvement in the economy, little 
privatization action was undertaken during the period under review, although there has been 
increased interest in revamping efforts in this area (sections 3.4.3, 4.2.1, 4.5.2, 4.6, 4.6.1, and 4.7). Emphasis remains placed on the Econom ic Transformation Program (ETP) of Government 
Linked Corporations (GLCs), which are now subject to more intensive competition as a result of the 
recent liberalization of some services sectors (sections 2.3 and 4.7), the move towards free-trade agreements (section 2.4.2), and the entry into force of new competition legislation 
(sections 1.4.2.3 and 3.4.4).  
1.4.2.3  Competition policy 
1.19.  Despite passing new comprehensive legislation (2010 Competition Act) and recent initiatives 
to improve the competitive environment, the Government remains accommodating of market 
dominance of certain corporations including those in energy and communications, which are 
exempt from the scope of the new legal framework (section 3.4.4).
35 To assure new investors and 
maintain orderly development and growth in the country's manufacturing sector, the Industrial 
Co-ordination Act 1975 (sections 2.5.1 and 3.4.4.1) requires manufacturing companies of a certain 
size to apply for a manufacturing licence, for appr oval by the Ministry of International Trade and 
Industry (MITI), thus possibly avoiding excessive and unhealthy competition in the same area.36  
1.4.2.4  Corporate governance and anti-corruption action 
1.20.  Malaysia, a regional leader in corporate governance, undertook regulatory, institutional, and 
other initiatives (e.g. the Corporate Governance Blueprint, Malaysian Code on Corporate Governance 2012) to improve its corporate gove rnance environment during the period under 
review (section 3.4.5); nevertheless, reform still seems to be required in certain areas, including 
encouraging companies to demonstrate a strong commitment to high levels of transparency rather than adhering only to minimum legal requirements , as suggested by recent World Bank and Asian 
Development Bank reports.
37  
1.21.  Lack of transparency, and thus lack of pub lic accountability, creates scope for administrative 
discretion and therefore corruption (section 2.5.1) . According to World Bank estimates, corruption 
costs Malaysia approximately RM 10 billion annually, equivalent to 1%-2% of annual GDP; 
according to Transparency International's Brib ery Survey 2011, 50% of the surveyed companies 
lost business or procurement contracts due to competitor corruption.38 Malaysia's anti-corruption 
strategy forms an integral part of the country's general policy objectives, which are embodied in 
its concept of, inter alia,  "Vision 2020" and the Government Transformation Programme (GTP) 
(section 2.3).39 In recent years, business organizations and the Government have introduced 
corporate codes of conduct to address anti-corru ption issues (e.g. 2011 anti-corruption principles, 
                                               
35 Commercial activities governed under the Energy Commission Act 2001 and the Communications and 
Multimedia Act 1998 are exempt from the new competition regime as these Acts already contain specific competition regulations and policies. 
36 The authorities indicated that the objective of the Industrial Co-ordination Act 1975 is not to eliminate 
competition within established industries. 
37 Asian Development Bank (2013). 
38 Transparency International on line information. Viewed at: 
http://www.transparenc y.org/research/bps2011 . According to the Heritage Foundation, it seems that the 
country's perceived level of corruption has increased, and there is no sign of effect ive anti-corruption measures 
(Heritage Foundation online information, "2013 In dex of Economic Freedom - Malaysia factsheet" . Viewed at: 
http://www.heritage.org/index/country/malaysia ; and Business Anti-Corruption Portal online information, 
"Malaysia Country Profile". Viewed at: http://www.business-anti-corruption.com/country-profiles/east-asia-the-
pacific/malaysia/general-information/#c78142 ).  
39 Malaysia signed the United Nations Convention against Corruption on 9 December 2003 and ratified it 
on 24 September 2008 ( http://treaties.un.org/Pages/ViewDetails.aspx?mtdsg_no=XVIII-
14&chapter=18&lang=en#EndDec ).  WT/TPR/S/292 • Malaysia 
 
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  the corporate liability clause, the 2011 Corporate Integrity Pledge40, the Whistleblower Protection 
Act). The Government has recognized red tape as an obstacle to doing business and a source of opportunities for corruption to occur; to address the issue it, inter alia,  simplified compliance with 
government administrative requirements (e.g. perm its, regulations, reporting), relaxed regulations 
on property investments by foreign investors, and released a guidebook on registering property. 
To combat grand corruption, the GTP aims to complete all corruption cases within one year; the target is to have 85%, 90%, and 95% of all corruption cases tried over each year between 2013 
and 2016.
41  
1.4.2.5  Labour market policies  1.22.  In July 2011, a new scheme to register foreign workers (this category excludes expatriates) 
residing in Malaysia, the 6P Program, was launched.
42 In line with similar developments in the 
region, a minimum wage (benefiting some 3.2 milli on workers) aimed at boosting wages of low 
skilled workers and enhancing productivity has been in effect since January 2013 (fully 
implemented since 2014, blanket deferment for SMEs until end 2013).43 A Private Retirement 
Scheme (PRS), an alternative to supplement the mandatory Employees Provident Fund (EPF), was 
introduced in July 2012 to address the gaps in retirement savings and provide an alternative platform for their accumulation to compleme nt the mandatory system. An Unemployment 
Insurance System was the subject of an Internatio nal Labour Organisation (ILO) study, which was 
finalized in 2013; the authorities indicated that many areas covered by the study need further consultations with stakeholders. Malaysia remains one of the world's largest importers of foreign labour, which keeps labour costs in check
44; the Government wishes to reduce reliance on foreign 
labour but has devised few plans to do this wi thout harming the country's economic expansion.45 
To address persisting labour market rigidity seemingly hampering dynamic job growth46, and to 
become a high income advanced nation by 2020, the authorities established Talent Corp 
(1 January 2011) and Talent Roadmap 2020 (24 April 2012). These are aimed at retaining highly 
qualified expatriates by easing the qualifications for a residency pass (a 10-year renewable multiple entry visa that enables top foreign talent to continue to reside and work in Malaysia) 
since April 2011; a Returning Expert Programme (REP) has encouraged returning qualified top 
Malaysian  professionals by offering tax incentives since 2001.
47 Furthermore, the retirement age 
for private sector workers was raised from 55 to 60 as from 1 July 2013. 
                                               
40 As of April 2013, 150 companies (including Siemen s Malaysia Sdn Bhd) had signed the pledge since 
its implementation (Business Anti-Corruption Portal online information, "Malaysia Country Profile". Viewed at: 
http://www.business-anti-corruption.com/country-p rofiles/east-asia-the-pacific/malaysia/general-
information/#c78142 ; and Transparency International online information. Viewed at: 
http://www.transparency.org/country#MYS ). 
41 Transparency International on line information. Viewed at: 
http://www.transparency.org/country#MYS . 
42 The registration process for foreign workers under  the 6P Program was completed on 31 August 2011. 
A total of 2,320,034 foreign workers (legal and illegal) were registered of which 1,303,126 (56%) were illegal (EIU, 2012a).  
43 According to the IMF, preliminary analyses suggest that it is likely to have a limited impact on 
inflation and unemployment. While the minimum wage should  provide incentives for a ffected firms to shift to 
more capital-intensive production technologies, a sustained increase in productivity would require implementing complementary reforms (sections 1.1 and 1.4.2) (IMF, 2013b).  
44 They are engaged mainly in the manufacturing, plan tation, and construction sectors, and as domestic 
helpers (EIU, 2012a; and Gil Sander et al. (2013). 
45 Measures taken to reduce depe ndency on foreign workers include the introduction of a minimum 
wage, priority given to the locals through job advertisement in JobsMalaysia, extension of the retirement age to prolong the career of local worker s, and the establishment of training institutes in order to increase the 
number of local skilled workers by 50% by 2020. 
46 The expanding economy and the shift in production to higher-value-added products and 
more-sophisticated processes have le d to more demand for skilled labour , which is often in short supply. 
National affirmative-ac tion guidelines for bumiputeras  restrict recrui tment, even if they are not strictly enforced 
(EIU, 2012a). 
47 These returning Malaysian professionals (degree holders with at least ten years of relevant 
experience), mainly in finance and accounting, engineering, oil and gas, healthcare, and information and 
communication technology (ICT), are eligible for a ten-ye ar residence pass and a flat income-tax rate of 15% 
for five years (EIU, 2012a; and Talent Corp online information. Viewed at: http://www.talentcorp.com.my/ ).  WT/TPR/S/292 • Malaysia 
 
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  1.5  Composition and Pattern of Trade 
1.23.  The openness of Malaysia's economy is such that during the period under review its 
dependence on foreign trade has remained high th ough characterized by a rising trend in imports 
and a drop in exports, depending on endoge nous and exogenous economic developments 
(sections 1.1 and 1.2). The ratios of exports an d imports of goods and services to GDP were 
87.1% and 75.3% in 2012 respectively, compared with 91.4% and 71.1% in 2009 (Table 1.1). Trade in services, which remains a minor component of Malaysia's foreign trade, accounted for 
16.2% of total trade in goods and services in 2012, virtually the same as in 2009 (Tables 1.1 
and 1.3, and section 4.7). 
1.24.  A shift in the composition of merchandise trade reflects domestic economic developments 
leading, inter alia,  to a rise in the share of commodities.
48 Manufacturing (mainly office machines 
and telecommunication equipment) and mining remain Malaysia's main exports. Nevertheless, the 
share of manufactured products dropped from 69.6% in 2009 to 61.6% in 2012 (Chart 1.1), while the share of mining (mainly fuels) rose from 16.3%  to 22.7%. Mining's share of imports also rose, 
while the share of manufactured products dropped (Chart 1.1).  
1.25.  The direction of merchandise trade remains relatively diversified and oriented towards Asia, 
Malaysia's main supplier and market. Asia, being the world's fastest growing consumer market 
with rising income and a growing middle class, has propped up intra-regional and global trade in 
recent years. Complementarities among economies in ASEAN, with increasing trends towards vertical specialization, accelerated trade and investment initiatives among countries of the region. In addition, regional and bilateral free-trade agreements (FTAs) have facilitated trade and 
investments across Asia to support growth among partner countries. During the review period 
there has been a minor shift away from the mark ets of the EU and the United States, towards 
Singapore, China, and Japan which were the main individual export destinations for Malaysian 
products in 2012 (Chart 1.2). The shares of China and Singapore, Malaysia's two major 
merchandise suppliers as of 2012, in total imports rose, while those of Japan, the EU, and the United States dropped (Chart 1.2). Malaysia's trade with ASEAN partners covers more than 25% of 
its international trade making intraregional demand an important driver of Malaysian growth, 
alongside global demand, global financial shocks, and commodity price movements.
49 It is 
projected that upon implementati on of the Trans-Pacific Partnership (TPP) Agreement, Malaysia's 
trade with TPP signatories will be boosted by 76 .3%; this calculation includes access to the 
emerging Latin American markets with which Malaysia has still to conclude an FTA (Mexico and 
Peru). 
 
                                               
48 In 2010, Malaysia's exports in terms of technological sophistication were 30% resource-based, 30% 
sophisticated manufacturing, 15%  mid-level manufacturing, 10% low tech manufacturing, and 5% 
knowledge-based services (UNCTAD, 2013b).  
49 IMF (2013b).  WT/TPR/S/292 • Malaysia 
 
- 22 - 
 
  Chart 1.1 Product composition of merchandise trade, 2009 and 2012 
2009 2012
(a)    Exports (f.o.b.)
Other consumer goods
9.5
Manufactures
69.6
Total:   US$157.2 billion Total:  US$227.3 billion
(b)    Imports (c.i.f.)
Chemicals
9.1Iron & steel
3.6Transport  equipment
6.5
Manufactures
75.1
Office machines &
telecommunication equipment
29.4Other electrical
machines  
7.0
Non-electrical 
machinery
8.3Non-electrical 
machinery
8.2Other
2.0
Other electrical 
machines
6.2Office machines & 
telecommunication equipment
27.5
Other semi-manuf.  
4.3Transport equipment
7.2
Chemicals
9.0Manufactures
67.9
Office machines &
telecommunication
equipment
22.4
Total:   US$123. 6 billion Total:   US$196. 4 billionPer cent
Manufactures
61.6Other electrical
machines
5.3Fuels
20.3Other electrical 
machines
4.5
Other 
consumer goods
6.8Other
2.3Mining
22.7
Office machines & 
telecommunication equipment
36.5Textiles &  clothing  
2.9Other
0.8
Other semi-manuf.  
6.5Non-electrical 
machinery
3.5Agriculture
14.9
Fuels
14.8
Other
consumer goods
6.6
Mining
19.2Other consumer 
goods
9.4
Textiles & clothing
2.8
Other semi-manuf.
6.8
Non-electrical 
machinery
3.3
Other semi-manuf.
4.6Mining
16.3Agriculture
13.3
Agriculture
10.9Agriculture
10.0
Mining
12.6
Iron & steel
3.7Other mining  1.5
Other mining 
2.3Chemicals  6.0
Chemicals  
6.6Other 
0.8
Fuels
14.2Fuels
8.2
Other
mining
5.0Other mining  
4.4
 
Source: UNSD, Comtrade database (SITC Rev.3). 
 WT/TPR/S/292 • Malaysia 
 
- 23 - 
 
  Chart 1.2 Direction of merchandise trade, 2009 and 2012 
2009 2012
(a)    Exports (f.o.b.)
Other Asia
42.7
Total:   US$1 57.2 b illion Total:  US $227.3 billion
(b)    Imports (c.i.f.)
Other 
6.1China
14.0
EU27
11.7Middle East
3.4Singapore
11.0United States
11.2
EU27
10.8China
15.1
Thailand
6.0
Singapore
13.2United States
8.1
Total:   US$123. 6 billion Total:   US$196.4 billionPer cent
Other Asia
46.6
Middle East
3.4Japan
9.8
Middle East
5.0Korea,  Rep. of
4.1Korea, Rep. of  
4.6United States
11.0Other Asia
8.8
United States
8.7Other 
5.5
Japan
10.3China
12.6
Singapore
13.6EU27
8.9China
12.2
Middle East 
3.9Singapore
14.9
Other Asia
40.9Other Asia
42.4Japan
12.5
Other
7.3Other Asia
7.2Hong Kong,
China
4.3
EU27
10.9Other
5.9India  
3.1
Australia
3.6Hong Kong,
China
5.2
Japan
11.8
Thailand
5.4Other Asia
9.5
Thailand 
6.1Other Asia   
7.1Chinese Taipei
4.2Chinese  Taipei
4.2
Indonesia
5.3Indonesia
5.1Thailand
4.8Australia
4.1
Indonesia
3.9Indonesia
3.1
ASEAN
28.0ASEAN
25.2ASEAN
26.8ASEAN
25.7
Other ASEAN
3.7Other ASEAN
2.8Other ASEAN
2.9
Other ASEAN
3.9India
4.2
 
Source: UNSD, Comtrade database. 
1.6  Trends and Patterns in Foreign Direct Investment  
1.26.  Following government efforts to encourage foreign direct investment (FDI) in the services 
sector (sections 2.3, 2.4, 2.5, and 4.7), between 2009 and 2012, FDI inflows peaked to 
US$12.2 billion in 2011, dropping to US$10.1 billi on in 2012 reflecting the uncertain global 
economic outlook and the diminishing appeal of Malaysia as a base for labour-intensive WT/TPR/S/292 • Malaysia 
 
- 24 - 
 
  industries.50 As a result Malaysia's share of Asia's total FDI inflows rose from 0.5% to 
2.5% (2012).51 Between 2008 and 2012, its FDI stock rose by 58.8%, and continued to be 
directed mainly to manufacturing and services activities (Chart 1.3). The EU and Singapore remain the main FDI stockholders, followed by Japan and the United States. In 2013, Malaysia ranked 
16
th (19th in 2012) among top prospective host economies for transnational corporations.52 Further 
plans to relax foreign ownership restrictions in 2012-16, and progress in the Trans-Pacific Partnership (TPP) Agreement negotiations (section 2.4.2.1) are, inter alia,  e x p e c t e d  t o  h e l p  
increase FDI inflows, further aiding the country in  achieving its stated goal of advanced economy 
status by 2020. For 2013, FDI was expected to be sustained as a result of larger inflows compared 
to the previous year; as of the first half of 2013 FDI had been largely channelled into manufacturing (44% of total net inflows) and oil and gas (30%), while the financial services 
sector (18%) also continued to receive considerable inflows as well.  
Chart 1.3 Foreign direct investment stock, 2008 and 2012 
2008 2012
(a)    By economic activity
Information & 
communication
7.7
Services
41.2
Hong Kong, China
2.5Singapore
17.8
EU27b
21.7Switzerland
4.9Other
27.9
Switzerland
4.5Manufacturing
46.2
Japan
14.1EU27b
18.9
Total:   RM 255.0 billion Total:   RM 404.9 billionPer cent
Construction
0.4
Agriculture, 
forestry & fishing
2.4Construction
0.4
Other
21.2Services
44.2
Manufacturing
49.1Wholesale & retail trade
7.4
Other services
6.0Finance & insurance
21.5Finance & insurance
21.0
Information &
communication
8.3Wholesale & retail trade
8.4
Other services
5.1
Japan
12.4Agriculture, 
forestry & fishing
3.4
British Virgin Islands
4.5British Virgin Islands
5.4
Hong Kong, 
China
3.6Mining & quarryinga
5.8
United States
8.7United States
14.2
Singapore
17.7(b)    By originMining & 
quarryinga
6.8
 
a Including oil and gas. 
b Only Denmark, France, German y, Luxembourg, the Netherlands, and the United Kingdom. 
Source: Bank Negara Malaysia online information.  
                                               
50 UNCTAD (2013b); and EIU (2012a).  
51 UNCTAD (2013b). 
52 UNCTAD (2013b).  WT/TPR/S/292 • Malaysia 
 
- 25 - 
 
  1.27.  Malaysia remains a major investor abroad. Malaysian companies invest abroad to expand 
markets, benefit from economies of scale, and thus enhance their competitiveness. Direct investment abroad (DIA) stock grew by 58.8% between 2008 and 2012, from RM 231.8 billion to RM 368.2 billion, inter alia  reflecting GLC's PETRONAS (section 4.5.1) investment in shale oil and 
gas in Canada (Chart 1.4); between 2009 and 2012, Malaysia's share of Asia's total DIA rose from 
3.7% to 5.5%.
53 A large share of DIA continues to be in the services sector, mainly finance and 
insurance, and primarily in the region, with Singapore becoming the main destination (Chart 1.4).  
Chart 1.4 Direct investment abroad stock, 2008 and 2012 
2008 2012
(a)    By economic activity
Information & 
communication
9.6
Services
51.3
Indonesia
15.2British Virgin Islands
4.3
EU27b
7.9Singapore
12.1
Australia
6.1Hong Kong,
China
2.8Viet Nam
2.2Other
38.0Manufacturing
5.4
British Virgin Islands
5.8
EU27b
4.9
Total:   RM 231. 8 billion Total:   RM 368. 2 billionPer cent
Construction
1.5Agriculture, 
forestry & fishing
8.4Construction
1.2
Other
41.1Services
56.9
Manufacturing
9.1Wholesale &
retail trade
3.4Other services
13.7Finance & insurance
30.6Finance & insurance
23.8Information &
communication
9.9
Wholesale &
retail trade
2.7Other services
14.6
Thailand
1.1Agriculture, 
forestry & fishing
6.0
Mauritius
5.6Mauritius
4.4
Hong Kong, 
China
1.7Mining & quarryinga
27.8Mining & quarryinga
32.4
Cayman Islands
3.9Cayman Islands
2.8
Singapore
16.2(b)    By destination
Australia
6.3
Viet Nam
2.3Thailand
3.2Indonesia
12.1
 
a Including oil and gas. 
b Only Germany, the Netherlands, and the United Kingdom. 
Source: Bank Negara Malaysia online information.  
 
                                               
53 UNCTAD (2013b). WT/TPR/S/292 • Malaysia 
 
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  2  TRADE AND INVESTMENT REGIME 
2.1  Introduction 2.1.  Since Malaysia's previous Review in 2010, there have been no changes to the main 
institutions involved in formulating trade policies. However, medium-term trade and investment 
policy objectives have been clarified and articulated in various recent strategy documents, all of 
which have the overriding objective to ensure that Malaysia becomes a self-reliant and industrialized nation by 2020. These strategies, inter alia , emphasize the importance of driving 
private sector growth; reducing state involvemen t in the economy; encouraging high value-added 
activities; integrating Malaysian companies into global value chains; and developing commercial 
ties with new markets. 
2.2.  Malaysia has not been involved in any new WTO dispute settlement cases over the review 
period, either as a complainant or respondent. It has maintained a consistent flow of notifications 
to the WTO, although some remain outstanding. Malaysia continues to negotiate new regional 
trade agreements (RTAs) both bilaterally and together with its ASEAN partners. Since 2010, new agreements have entered into force, with Australi a, New Zealand, India, Korea, and Chile. Further 
integration has also taken place within ASEAN.  
2.3.  In 2012, Malaysia began a second wave of autonomous services-sector liberalization; 
commencing reductions to, or elimination of, foreign equity thresholds in a number of subsectors as well as formalizing the market access status quo in accountancy services where full foreign 
equity participation was already permitted. Regulatory reforms undertaken since 2010 have 
included cutting processing times for dealing with customs permits; eliminating and simplifying licencing requirements; and reducing the time requ ired for the approval of construction permits. 
Additionally, a National Policy on the Developm ent and Implementation of Regulations, issued 
in 2013, requires federal government entities to follow certain steps in developing regulations 
affecting business, trade, and investment. Regulatory impact analyses must be conducted, stakeholders must be consulted, and all laws and regulations must be reviewed every five years. 
The general assessment of Malaysia's business climate is very positive, although further reforms 
are deemed necessary to improve government serv ices, tackle corruption, increase the country's 
technological readiness, and address various labour-related issues.  
2.2  General Framework 
2.4.  Malaysia is a federation of 13 states and 3 federal territories (Kuala Lumpur, Putrajaya, and 
Labuan). The executive power of the Federation is  vested in the Head of State (Yang di-Pertuan 
Agong) and exercisable by him or the Cabinet, wh ich is presided over by the Prime Minister. The 
legislative authority of the Federation is vested in Parliament.
1 Each State has its own state 
constitution, executive council, and legislative assembly. The division of legislative authority 
between the federal government and states is demarcated in the Federal Constitution.2 Among 
matters falling under federal competence are external affairs, trade, commerce, industry, shipping, fisheries, communications, and transport. Land, agri culture, and forestry ar e within the purview of 
the state legislative assemblies. Social welfare, public health, sanitation, and the prevention of 
diseases are among the matters under joint authority. State governments have licensing powers within their spheres of competence. While taxation  is under federal responsibility, the Parliament 
may, by law, assign proceeds from taxes collected, ra ised or levied within the State, to the State, 
such as revenue from lands, mines, and forests.
3 
2.5.  Malaysia's judicial system consists of su perior and subordinate courts. The superior courts 
are the Federal Court, the Court of Appeal, the High Court in Malaya, and the High Court in Sabah and Sarawak. The subordinate courts are the sessi ons courts and the magistrates' courts. Among 
                                               
1 Parliament consists of the Yang di-Pertuan Agon g and the two Houses of Parliament: the Senate and 
the House of Representatives. 
2 Under Article 74 of the Constitution, Parliament may make laws with respect to matters enumerated in 
the Federal List and the Concurrent List in the Ninth Schedule. State legislative assemblies may make laws with respect to matters enumerated in the State List and Concurrent List in the Ninth Schedule. Under Article 77 of the Federal Constitution, the State Legislative Assembly has the power to make laws with respect to any 
matter not enumerated in any of the lists in the Ninth Schedule. Ninth Schedule to the Constitution viewed at: 
http://www.wipo.int/wipolex/en/text.jsp?file_id=200347#LinkTarget_1655 .  
3 Federal Constitution, Article 110 and Tenth Schedule, Part III. WT/TPR/S/292 • Malaysia 
 
- 27 - 
 
  the superior courts, the Federal Court is the highest and final court of appeal in Malaysia, followed 
by the Court of Appeal and the two high courts.4  
2.3  Trade Policy Formulation and Objectives 
2.6.  As at the time of Malaysia's previous TPR,  the Ministry of International Trade and Industry 
(MITI) has key responsibility for developing Malays ia's policy positions on international trade and 
investment in various fora, including the WTO, FTAs, UNCTAD, and APEC. The key MITI agencies 
with trade-related functions are: the Malaysian Investment Development Authority (MIDA), which 
takes the lead in promoting Malaysia's manufacturing and services sectors; the Malaysian External Trade Development Corporation (MATRADE), which is responsible for exporter development and 
export promotion activities; and the Malaysia Productivity Corporation (MPC), which undertakes 
various activities related to monitoring and enhancing the productivity and competitiveness of the 
economy.  
2.7.  Other key government entities with trade- related functions are the Economic Planning Unit 
(EPU), which is responsible for developing Mala ysia's five-year development plans (see below), 
and the Performance Management and Delivery Unit (PEMANDU), which is responsible for 
implementing the Government's Economic Transf ormation Program (ETP) (see below). Both of 
these entities are under the responsibility of the Department of the Prime Minister. 
2.8.  MITI coordinates national consultations on WTO issues, including on the Doha Development 
Agenda (DDA), in 11 working groups that bring together ministries, government agencies, the 
private sector, academia, and other stakeholders.
5 According to the authorities, the working 
groups meet as and when necessary. Consultati ons with relevant stakeholders (including 
non-governmental stakeholders) are conducted at all stages of FTA negotiations (Chart 2.1). 
Chart 2.1 FTA negotiation procedures 
 
Source: Information provided by the authorities. 
2.9.  The direction of trade policy may be understood in the context of Malaysia's long-term 
objective, developed in 1991 by the then Prime Mini ster, to transform itself into a self-reliant and 
industrialized nation by the year 2020 (Vision 2020) . Following the global financial crisis in 2009, a 
fresh approach with new strategies was developed to  give new impetus to realizing this vision. This 
began with the Prime Minister commissioning a stud y by a group of eminent persons, the National 
Economic Advisory Council (NEAC). The NEAC produced the New Economic Model for Malaysia (NEM) in 2010, which concluded that in order for Malaysia to achieve economic growth (with an 
income per capita target of US$15,000-20,000) on an inclusive and sustainable basis, an 
economic, social, and governmental transformation was required. Based upon these recommendations, the Government developed a ra nge of strategies. At the heart of these 
strategies is the Government's 1Malaysia Policy , which seeks to reinforce national unity and 
                                               
4 The jurisdiction of the superior court is set out in the Court of Judicature Act 1964 (Act 91), whilst the 
jurisdiction of the subordinate courts is stipul ated in the Subordinate Courts Act 1948 (Act 91). 
5 The respective working groups cover: agricultur e; services; non-agriculture market access (NAMA); 
trade and environment; trade related aspects of intellectual property rights (TRIPs); WTO rules; investment; 
competition policy; government procurement; trade facilitation; and e-commerce. MITI online information. 
Viewed at: www.miti.gov.my/cms/content.jsp?id=com.tms.cms.section.Section_f5694606-c0a81573-
78d578d5-759be8c9 . Pre FTA negotiation  
Feasibility study 
(including feedback 
from stakeholders) 
Obtain mandate from 
Cabinet  
Additional stakeholder 
consultations 
Scoping paper  FTA negotiation  
Appointment of National 
Trade Negotiation team 
Negotiation meetings 
and coordination with Cabinet 
Conclusion of FTA Seek approval from 
Cabinet  Conclusion of FTA 
Signing of FTA after 
approval from Cabinet 
Gazetting of tariff 
schedule by Attorney General's office 
No requirement for 
parliamentary 
ratification  WT/TPR/S/292 • Malaysia 
 
- 28 - 
 
  maintain political stability (Chart 2.2).6 The two key strategies affecting the climate for business, 
trade, and investment, the Economic Transf ormation Programme (ETP) and Government 
Transformation Programme (GTP) are being implemented through the Government's 10th Malaysia 
Plan for the period 2011 to 2015.  
Chart 2.2 Vision 2020 and associated economic and social strategies 
 
Source: Pemandu. 
2.10.  Included among the numerous reforms proposed in the GTP, ETP, and the 10th Malaysia 
Plan are the importance of encouraging privat e-sector led growth and integrating Malaysian 
companies into global value chains. They illustrate the need for Malaysia to redouble its efforts to 
attract investment, encourage greater competition, drive productivity and innovation, and nurture skills. They foresee a movement away from sect oral diversification towards higher value-added 
and knowledge intensive activities, and specialization. As part of this specialization strategy, 
12 national key economic areas (NKEAs) have been identified under the ETP as drivers of 
economic activity that have the potential to contri bute significantly to economic growth: oil, gas, 
and energy; palm oil and rubber; financial services; tourism; business services; electric and 
electronics (E&E) industry; wholesale and retail trade; education; healthcare; communications 
content and infrastructure; agriculture; and greater Kuala Lumpur/Klang Valley. The ETP also incorporates eight strategic reform initiatives orig inally put forward by th e NEAC: reenergizing the 
private sector; developing quality workforce and reducing dependency on foreign labour; creating 
a competitive domestic economy; strengthening of the public sector; transparent and market 
friendly affirmative action; building the knowledge base infrastructure; enhancing the sources of growth; and ensuring the sustainability of growth.  
2.11.  The reports propose a leaner role for the Government in the economy, inter alia , through a 
new wave of privatizations of government-linked companies (GLCs), trade and investment liberalization (particularly with respect to services sectors), regulatory reforms at various 
government levels, and the removal of distortionary price controls. The reports further stress that 
Malaysia must make stronger inroads into fast-growing markets in Asia and ASEAN as well as the Gulf states, through trade promotion activities, trade agreements, and other measures, such as 
                                               
6 ETP viewed at: http://etp.pemandu.gov.my/Overview-@-Overview_of_ETP.aspx ; and 10th Malaysia 
Plan viewed at: http://www.pmo.gov.my/dokumen attached/RMK/RMK10_Eds.pdf .  10th Malaysia Plan (2010) 
Development strategies for the period 2011-15 and represents the policy  
operalization of the GTP and ETP Government 
Transformation 
Programme (GTP) 
2010 
Effective delivery of 
government services 
including through 
streamlined bureaucratic 
process and reduced costs 
of doing business 
6 National Key Result Areas 
(NKRAs ) Social Transformation 
Programme 
Community 
Transformation 
Programme 
(Rural and Urban) 
Political Transformation 
Programme 
Digital Transformation 
Programme  Economic Transformation 
Programme (ETP) 
2010 
Economic transformation 
towards a high income 
country by 2020 
8 Strategies Reform 
Initiatives (SRIs) and 
12 National Key Economic 
Areas (NKEAs)  National Transformation Policy (Vision 2020) 1Malaysia, 
People First, Performance Now (2009) WT/TPR/S/292 • Malaysia 
 
- 29 - 
 
  extended networks of flight routes . This is to be undertaken in conjunction with strengthening links 
with Malaysia's traditional export markets including Australia, Europe, and the United States.  
2.12.  Since 2009, various new trade-related laws have entered into force, notably, the Malaysian 
Quarantine and Inspection Services Act (section 3.2.5.2); the Biosafety Act (section 3.2.5.2.2); 
the Strategic Trade Act (section 3.3.2); the Competition Act (section 3.4.3); and the Price Control 
and Anti-Profiteering Act (section 3.4.4.2).  
2.4  Trade Agreements and Arrangements 
2.4.1  WTO  
2.13.  Malaysia is an active participant in the regular work of the WTO as well as in the DDA round 
of negotiations. It grants at least MFN treatment to all trading partners. Malaysia is a participant in the WTO Information Technology Agreement (ITA ) and signatory to the GATS protocols on 
telecommunications (Fourth Protocol) and Financial Services (Fifth Protocol).
7 It is not a signatory 
to the WTO plurilateral Agreement on Trade in Civil Aircraft. It became an observer to the plurilateral Government Procurement Agreement (G PA) in 2012. Malaysia submitted an initial offer 
in the DDA negotiations on services in 2005 and a revised offer in 2006.
8  
2.14.  During the review period, Malaysia ha s not been involved in any new WTO dispute 
settlement cases either as complainant or respondent. However, Malaysia did participate as a 
third party to the Australia – Tobacco Plain Packaging  (DS434) complaint raised by Ukraine. 
2.15.  Malaysia has maintained a reasonably consistent flow of notifications to the WTO 
(Table A2.1). As at end October 2013, notificati ons were outstanding with respect to: agriculture 
(tariff quotas); import licensing procedures; quantitative restrictions; and customs valuation. It 
has not yet notified its MFN tariffs for 2013, nor has it submitted import data for 2012. It has not 
notified "any new, or any changes to existing laws, regulations or administrative guidelines which significantly affect trade in services", which it is  obliged to notify under Article III:3 of the GATS. 
2.4.2  Regional and preferenti al agreements (RTAs and PTAs) 
2.4.2.1  RTAs 2.16.  Malaysia is a member of ASEAN, which has component agreements on goods (ASEAN Trade 
in Goods Agreement (ATIGA)), services (ASEAN Framework Agreement on Services (AFAS)) and 
investment (Comprehensive Investment Agreement (ACIA)). Including ASEAN members, Malaysia's network comprises 13 RTAs encompassing 17 trading partners. In a number of cases, Malaysia has negotiated bilateral agreements with third countries to supplement commitments 
under ASEAN RTAs (Table 2.1).
9 M a l a y s i a  i s  a l s o  a  s i g n a t o r y  t o  t h e  G l o b a l  S y s t e m  o f  T r a d e  
Preferences among Developing Countries (GSTP) unde r which it grants a 10% preferential tariff for 
certain woven fabrics made of man-made fibres.10 
Table 2.1 RTAs in force, July 2013 
Country ASEAN Members ASEAN FTA 
(entry into force) Bilateral FTAs 
(entry into force) 
Australia  ■ (2010)  ■ (2013) 
Brunei Darussalam ■   
Cambodia ■   
Chile   ■ (2012) 
China  ■ (2005a and 2007b)  
India  ■ (2010)  ■ (2011)  
                                               
7 WTO documents GATS/SC/52/Suppl.2, 11 April 1997; and GATS/SC/52/Suppl.3, 26 February 1998. 
8 WTO documents TN/S/O/MYS, 31 January 2005; and TN/S/O/MYS/Rev.1, 31 January 2006. 
9 MITI online information. Viewed at: 
http://www.miti.gov.my/cms/content.jsp?id=com.tms.cms.section.Section_8de83760-7f000010-72f772f7-
f5047602 . 
10 UNCTAD online information. Viewed at: 
http://www.unctadxi.org/Secured/GSTP/Concessions/malaysia_en.PDF . WT/TPR/S/292 • Malaysia 
 
- 30 - 
 
  Country ASEAN Members ASEAN FTA 
(entry into force) Bilateral FTAs 
(entry into force) 
Indonesia ■   
Japan  ■ (2009)  ■ (2006)  
Korea, Rep. of  ■ (2010a and 2009b)  
Lao PDR ■   
Myanmar ■   
New Zealand  ■ (2010)  ■ (2010)  
Pakistan   ■ (2008)  
Philippines ■   
Singapore ■   
Thailand ■   
Viet Nam ■   
a  Entry into force of goods component of the agreement. 
b  Entry into force of services  component of the agreement.  
Source:  WTO RTA database. Viewed at: http://rtais.wto.org . 
2.17.  At the ASEAN level, there have been several developments since Malaysia's Review in 2010, 
as ASEAN members states have continued to work towards achieving an ASEAN Community 
by 2015.11 The ASEAN Community comprises three pillars: political-security; socio-cultural; and 
economic. An AEC Blueprint sets out the targets and deadlines for advancing the economic pillar ( t h e  A S E A N  E c o n o m i c  C o m m u n i t y  ( A E C ) ) .  A s  r e p o r t e d  b y  M I T I ,  b y  J u n e  2 0 1 3  M a l a y s i a  h a d  
implemented over 88% of the AEC Blueprint measures (328 out of the 372 measures).
12 It also 
completed its ASEAN tariff elimination programme in 2012; 99.1% imports from Malaysia's ASEAN partners are now duty free.
13 Malaysia maintains duties on 73 tariff lines covering tropical fruits 
and tobacco (levied at 5%), and rice (15% and 20%). Malaysia is not obliged under the ATIGA to 
further liberalize these tariff lines. An additional 82 tariff lines are excluded from liberalization, 
including alcoholic beverages and arms. Further services liberalization within ASEAN has also been undertaken over the review period (section 4.7). 
2.18.  In order to implement the AEC Blueprint targets, the Agreement on the Common Effective 
Preferential Tariff Scheme for the ASEAN Free Trade Area (CEPT-AFTA) was reviewed in 2008 and enhanced into a more comprehensive legal instrument, the ASEAN Trade in Goods Agreement 
(ATIGA). This entered into force in May 2010. The ATIGA preserves, consolidates, and streamlines 
all the provisions in the CEPT-AFTA; enhances the transparency of Members' tariff reduction schedules; codifies non-tariff measures (NTMs), and a mechanism has been set up to monitor their elimination; and it includes a dedicated chapter on trade facilitation. To help exporters, Malaysia 
adopted a pilot self-certification system for the issuance of Certificates of Origin under the ATIGA 
in 2010. According to the authorities, 100 exporters were self-certified by end 2012.
14 This pilot 
project is has been extended until 2015. 
2.19.  The ASEAN Comprehensive Investment Agreement (ACIA) and the ASEAN Agreement on 
Customs (AAC) entered into force in 2012. The ACIA replaced the ASEAN Investment Agreement (AIA) and ASEAN Investment Guarantee Agreement (IGA).
15 It brings together liberalization, 
protection, promotion, and facilitation measures under a single comprehensive agreement. Among 
its features are national treatment and MFN obligations, a single negative list with reservations to investment a broad definition of investors and investments, and the inclusion of portfolio investment and intellectual property; and adoption of investor-state dispute settlement 
mechanisms. The AAC supersedes the 1997 agreement and has provisions on trade facilitation, 
closer partnership, and mutual assistance between  customs administrations. It also promotes a 
new customs culture based on voluntary compliance, control by exception and an electronic 
                                               
11 The end-goal of the ASEAN Community is to achiev e a single market and production base, in which 
there is a free flow of goods, services , investments, and skilled labour, and a freer flow of capital, along with 
equitable economic development, and reduce d poverty and socio-ec onomic disparities. 
12 The AEC Blueprint is a dynamic document, henc e the number of measures contained therein has 
increased. 
13 MITI (2013).  
14 MITI (2013).  
15 IGA was an investment guaran tee agreement among signatory ASE AN members and centred on the 
protection and promotion of invest ments. The AIA established a more liberal and transp arent investment 
climate among ASEAN members.  WT/TPR/S/292 • Malaysia 
 
- 31 - 
 
  customs environment. It is also intended to align ASEAN members' customs practices and 
procedures with international best practice.  
2.20.  Seven new RTAs entered into force for Malaysia during the review period. Three are ASEAN 
RTAs with third countries (Australia and New Zealand, India, and Korea), and four are bilateral 
agreements (with Chile, India, New Zealand, and Australia) (Table 2.2). In addition, the goods 
part of ASEAN's RTA with China was amended in 2010. The Protocol to Incorporate Technical Barriers to Trade and Sanitary and Phytosanitary Measures into the ASEAN-China TIG Agreement 
was signed in November 2012 and entered into force in January 2013.  
Table 2.2 Main features of new RTAs, 2010-13 
ASEAN RTAs 
Agreement Establishing the ASEAN-Australi a-New Zealand Free Trade Area (AANZFTA) 
Date of signature/entry into force  
 
End of transition period for 
Malaysia (goods liberalization) 
 
 
 
Selected features 
 
 
 
WTO consideration status 
 
Malaysia's merchandise trade with 
Australia and New Zealand (2012) 2009/2010  
 
2020: 96.2% of tariff lines will be duty free; 307 tariff lines will 
continue to attract tariffs between 5%  and 20%, mainly covering 
iron and steel, vegetables, gl ass, tobacco, agriculture, and 
automotive parts 
 
Services (see section 4.7); competition; electronic commerce; 
elimination of agricultural export subsidies; intellectual property 
rights; investment; bilateral safeguard 
 
Factual presentation not distributed 
 
Australia: 2.4% of total imports; 4.1% of total exports 
New Zealand: 0.4% of total imports; 0.5% of total exports 
Framework Agreement on Comprehensive Econ omic Co-operation between ASEAN and the 
Republic of India, Agreement on Trade in Goods 
Date of signature/entry into force 
 
End of transition period for 
Malaysia (goods liberalization) 
 
 
 
Selected features 
 
WTO consideration status 
 
Malaysia's merchandise trade with 
India (2012) 2009/2010 
 
2019: 79.5% of tariff lines will be duty free; 2,126 tariff lines will 
continue to attract tariffs betw een 2% and 20%, mainly covering 
plastics, rubber, special woven fabric, articles of apparel and 
clothing accessories, and iron and steel 
 
Bilateral safeguard; services are not covered under this agreement 
 
Factual presentation not distributed 
 
1.9% of total imports; 4.2% of total exports 
 
Framework Agreement on Comprehensive Economic Co-operation among the Governments of 
the Republic of Korea and ASEAN 
Date of signature/entry into force 
 
End of transition period for 
Malaysia (goods liberalization) 
 
 
 
 
Selected features 
 
 
WTO consideration status 
 
Malaysia's merchandise trade with 
Korea (2012) Goods: 2006/2010; services: 2008/2009 
 
2016: 93.8% of tariff lines will be duty free; 521 tariff lines will 
continue to attract tariffs of 5%, mainly covering dairy products, 
edible fruit and nuts, inorganic chemicals, chemicals, plastics, 
ceramics, glass and glassware, iron and steel, aluminium, 
electrical machinery, and non-locomotive vehicle parts 
 
Services (see section 4.7); b ilateral safeguard; investment 
agreement to be negotiated 
 
Factual presentation not distributed 
 
4.1% of total imports; 3.6% of total exports 
 WT/TPR/S/292 • Malaysia 
 
- 32 - 
 
  BILATERAL RTAs 
Malaysia-Chile Free Trade Agreement (MCFTA) 
Date of signature/entry into force  
 
End of transition period for 
Malaysia (goods liberalization) 
 
 
 
Selected features 
 
WTO consideration status 
 
Malaysia's merchandise trade with 
Chile (2012) 2010/2012  
 
2016: 98% of tariff lines will be duty free; 133 tariff lines will 
continue to attract tariffs betw een 5% and 40%, mainly covering 
fireworks and explosives, amm unition, tobacco, and alcoholic 
beverages 
 
Services are not covered under this agreement; bilateral safeguard 
 
Factual presentation not distributed 
 
0.1% of total imports; 0.1% of total exports 
Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA) 
Date of signature/entry into force 
 
End of transition period for 
Malaysia (goods liberalization) 
 
 
 
Selected features 
 
 
WTO consideration status 
 
 
 
Malaysia's merchandise trade with 
India (2012) 2011/2011 
 
2019: 82.8% of tariff lines will be duty free; 1,790 tariff lines will 
continue to attract tariffs betw een 5% and 20%, mainly covering 
tropical fruit, chemicals and plastics, ceramics, iron and steel, 
textiles, electric and electronic products, and auto motives  
 
Services (see section 4.7); inve stment; intellectual property 
rights; bilateral safeguard 
 
Factual presentation distributed (WTO documents 
WT/COMTD/RTA/5/1 and WT/REG329/1) 
Date of consideration in  WTO: 16 September 2013 
 
1.9% of total imports; 4.2% of total exports 
 
Malaysia New Zealand Free Trade Agreement (MNZFTA) 
Date of signature/entry into force 
 
End of transition period for 
Malaysia (goods liberalization) 
 
 
Selected features 
 
 
WTO consideration status 
 
 
Malaysia's merchandise trade with 
New Zealand (2012) 2009/2010 
 
2016: 99% of tariff lines will be duty free; 89 tariff lines will 
continue to attract tariffs betw een 5% and 40%, mainly covering 
firearms, bullets, rice, to bacco, and liquor products 
 
Services (section 4.7); competition; environment; investment; 
intellectual property rights ; labour; bilateral safeguard 
 
Factual presentation distribute d (WTO document WT/REG306/1) 
Date of consideration in WTO: 20 November 2012 
 
New Zealand: 0.4% of total imports; 0.5% of total exports  
Malaysia Australia Free Trade Agreement (MAFTA) 
Date of signature/entry into force 
 
End of transition period for 
Malaysia (goods liberalization) 
 
 
Selected features 
 
 
 
WTO consideration status 
 
Malaysia's merchandise trade with 
Australia (2012) 2012 /2013 
 
2025: 99% of tariff lines will be  duty free. 87 ta riff lines are 
excluded from liberalization; these mainly relate to firearms, 
bullets, artillery weapons, to bacco, and liquor products 
 
Services (see section 4.7); competition; electronic commerce; 
environment; intellectual property rights; investment; labour; 
bilateral safeguard 
 
Factual presentation not distributed 
 
Australia: 2.4% of total imports; 4.1% of total exports 
Source: WTO Secretariat and MITI online information. Viewed at: http://www.miti.gov.my/cms/index.jsp . WT/TPR/S/292 • Malaysia 
 
- 33 - 
 
  2.21.  Malaysia has signed and ratified both the Trade Preferential System of the Organization of 
the Islamic Conference (TPS-OIC) and the Deve loping Eight Preferential Tariff Arrangement 
(D8-PTA), but as at October 2013 neither had entered into force. The TPS-OIC, which brings together 40 signatory economies, comprises a Framework Agreement, a Protocol on the 
Preferential Tariff Scheme (PRETAS), and the TPS-OIC Rules of Origin.
16 According to the 
authorities, the OIC is discussing arrangements to implement the agreement now that the minimum number of participants required to sign and ratify the TPS-OIC Protocol on the 
Preferential Tariff Scheme (PRETAS) and the TPS-OIC rules of origin has been met. Contracting 
parties to the D8-PTA are Iran, Malaysia, Nigeria, Turkey, Indonesia, and Pakistan; the target date 
for implementation was 1 November 2013. However, as at end November 2013, no contracting party had submitted their final offer list thus delaying its implementation. 
2.22.  Malaysia is in the process of negotiatin g RTAs with Turkey, the European Union, and the 
European Free Trade Association (EFTA).
17 It is a participant in the Trans-Pacific Partnership (TPP) 
negotiations together with Australia, Brunei Darussalam, Canada, Chile, Japan, Mexico, 
New Zealand, Peru, Singapore, Viet Nam, and the United States. It is also a participant in the 
Regional Comprehensive Partnership (RCEP) negotiations launched in 2012, which aims to deepen the linkages among the 16 participating economies (ASEAN members plus countries with which it 
has existing FTAs: Australia, China, India, Japan, Republic of Korea, and New Zealand).
18 An 
ASEAN-India FTA on services and investment agreements has been concluded and it is expected to be signed in December 2013. 
2.4.2.2  PTAs 
2.23.  Malaysia receives GSP (Generalized Syst em of Preferences) treatment from the EU and 
Turkey until 31 December 2013, as well as Japan, Norway, the Russian Federation, Belarus, and Switzerland.  
2.4.3  Other agreements and arrangements 
2.24.  Malaysia is a member of APEC and has been participating in its trade and 
investment-related initiatives over the review period. These include: the second Trade Facilitation 
Action Plan (TFAP II), which called for a 5% reduction in transaction costs by 2010; the Supply 
Chain Connectivity Framework launched in 2009; and the 2010 Bogor Goals Assessment. Malaysia is also a proponent of the APEC Ease of Doing Business Action Plan (2010-15). This initiative has 
established goals for an APEC-wide improvement in five key areas of doing business by 2015: 
starting a business; dealing with permits; getting credit; trading across borders; and enforcing 
contracts.
19 In 2011, Malaysia extended the APEC Business Travel Card (ABTC) facilities to 
transitional ABTC member economies, including Canada, Russia, and the United States. Malaysia 
also extended its ABTC special lane facilities to seven major checkpoints.20 The ABTC allows 
business travellers pre-cleared and facilitated short-term entry to participating member economies.  
2.25.   In October 2012, ASEAN Economic Ministers endorsed an ASEAN-Russia Trade and 
Investment Cooperation Roadmap, the objective of  which is to enhance economic cooperation and 
address emerging challenges and opportunities fo r trade and investment between the respective 
countries. This builds on an Agreement on Economic and Development Cooperation between 
ASEAN and Russia signed in 2005. 
                                               
16 Framework Agreement on the TPS-OIC, the PRETAS, and the TPS-OIC Rules of Origin viewed at: 
http://www.oic-oci.org/oicv2/page/?p_id=40&p_ref=16&lan=en . As at October 2013, 30 of the 40 OIC 
members that had signed the Framework Agreement, had ratified it; 31 countries had signed and 15 had 
ratified the TPS-OIC Rules of Origin; of these, 12 members had submitted their Concession Lists. 
17 EFTA comprises Switzerland, Norw ay, Iceland, and Liechtenstein. 
18 As at October 2013, two rounds of RCEP negotiations  had been held; the target date for conclusion 
is 2015. 
19 APEC (2012b). 
20 APEC (2012a). WT/TPR/S/292 • Malaysia 
 
- 34 - 
 
  2.5  Investment Regime 
2.5.1  Overview 2.26.  The Malaysian Investment Development Authority (MIDA), under MITI is the Government's 
principal agency for the promotion of manufacturing and services (excluding financial services and 
utilities). MIDA's National Committee on Investments (NCI), established in 2010, is charged with 
evaluating applications for manufacturing licences, income tax incentives, and customs duty exemptions.
21 The NCI is able to approve applications for incentives immediately. Manufacturing 
licences, which are required for persons engaging in manufacturing activities over a certain size, 
are issued automatically within seven days unless they relate to sensitive industries/activities: security, safety, health, environmental and religious considerations; projects proposed to be located in Sabah or Sarawak; or projects requiring approval under the Petroleum Development 
Act.
22 Under the NCI's client chart, responses to manufacturing licence applications in these 
sensitive areas should be provided within four weeks. A public-private-sector task force, called PEMUDAH, is responsible for identifying measures to improve the business environment in 
Malaysia.
23 
2.27.  Investment activity in Malaysia (both domestic and foreign) continues to be regulated under 
the Promotion of Investments Act (PIA), and the In dustrial Co-ordination Act (ICA). The PIA sets 
out rules on corporate income tax relief for the establishment and development in Malaysia of 
certain economic activities, as well as for the promotion of exports (section 3.4.1).24 The ICA was 
enacted in 1975 with the objective of maintainin g orderly development and growth in Malaysia's 
manufacturing sector, and requires manufacturing companies of a certain size to be licensed 
(see above).25  
2.28.  Malaysia's business environment has received positive assessments from various sources. 
For example, Malaysia was ranked 12th out of 185 economies in the World Bank's Doing Business 
Index  in 201326; 25th out of 144 economies in the World Economic Forum's (WEF) Global 
Competitiveness Report (2012-2013)27; and 24th out of 124 economies considered in the 
WEF's 2012 Global Enabling Trade report.28 Malaysia has been ranked highly for: strong investor 
protection; low costs associated with importing an d exporting; having an efficient and competitive 
market for goods and services; its supportive financial sector (and easily obtained credit); its high quality transport infrastructure and associated services; as well as for having a business-friendly institutional framework that is transparent and not over-burdened with red-tape. The World Bank 
has commended Malaysia for recently reducing proc essing times for obtaining construction permits 
and for registering property. Malaysia has received less positive rankings for its low level of technological readiness. Some of the most problematic factors for doing business in Malaysia have 
been identified: an inefficient government bureaucracy, corruption, and various labour-related 
issues (inadequate education, poor workforce ethics, and restrictive labour regulations).  
2.29.  Over the review period, Malaysia has been taking steps to modernize its business 
regulations, as mandated by the ETP and 10
th Malaysia Plan (see above). This has involved, 
inter alia , reviewing licensing requirements, facilitating applications for construction permits, and 
developing a policy and guidelines for ensuring the quality of new regulations. 
2.30.  The review of business licensing requirements, by a newly established Regulatory Review 
Department within the Malaysia Productivity Commission (MPC) (see above), began in 2010. A 
                                               
21 The NCI took over the responsibilities of the Ac tion Committee on Indust ry (ACI), the National 
Committee on Investment in Services Sub-Sectors (NCIS), the Supreme Committee for Special Incentives (JTGI), and the Committee on Various Economic Corridors.  
22 The Industrial Coordination Act, 1975 requires pers on(s) engaging in any manufacturing activity with 
shareholders' funds of RM2.5 million and above or employ ing 75 or more full-time pa id employees to obtain a 
manufacturing licence. 
23 PEMUDAH online information. Viewed at: www.pemudah.gov.my .  
24 Promotion of Investments Act (Act 327), 1986. Viewed at: 
www.agc.gov.my/Akta/Vol.%207/Act%20327.pdf .  
25 MIDA online information. Viewed at: www.mida.gov.my/env3/index.ph p?page=approval-of-projects . 
ICA viewed at http://www.agc.gov.my . There have been no amendments to this act over the review period. 
26 World Bank (2013a).  
27 World Economic Forum (2012a).  
28 World Economic Forum (2012b).  WT/TPR/S/292 • Malaysia 
 
- 35 - 
 
  total of 761 licensing requirements at the federal, state, and local levels were identified and 
reviewed with a view to removing those deemed no longer relevant or burdensome. As a result of this exercise, 386 licensing requirements were eliminated by 2012 and the remainder are being 
looked at to see if they can be simplified. The authorities estimate that this will result in considerable reductions in business compliance costs. 
2.31.  As a result of efforts to improve the effi ciency of dealing with construction permits in 
Kuala Lumpur, permit approval procedures have  been reduced from 37 steps to 10. The time 
taken to approve permits has been reduced from 140 days to 100.  
2.32.  In 2013, the Government issued a National  Policy on the Development and Implementation 
of Regulations to promote an effective, efficient, and accountable regulatory process. The policy 
applies to all federal government ministries, departments, statutory bodies, and regulatory commissions, which are now required to follow certain steps in developing regulations relating to trade, investment, and business.
29 Regulators are required to make sure that government 
intervention is justified, stakeholders are consul ted, an impact analysis is conducted, adverse 
impacts on the capacity of the economy to gene rate wealth and employment are minimized, and 
regulations are not unnecessarily burdensome. The National Development Planning Committee 
(NDPC) is responsible for overseeing the implementa tion of this policy, and is assisted by the MPC 
and the National Institute of Public Administration. According to the authorities, three pilot projects 
are in train with MITI, the Federal Agricultural Marketing Authority, and the SPAN (the water 
commission) with MDC assisting them to undertake public consultations and impact analysis. 
Regulators must also ensure that all laws and regulations are reviewed every five years.30  
2.33.  PEMUDAH has also improved the process of dealing with multiple government agencies 
through the introduction of the Malaysia Corporate Identity (MyCoID), launched in February 2010, which acts as a single reference number for local companies to transact or register with various government agencies.  
2.34.  Malaysia's recent efforts to tackle corruption have included the establishment of an 
independent Malaysian Anti-Corruption Commi ssion (MACC) in 2009. Under the MACC Act, 
Malaysia has criminalized both active and passive bribery and has included bribery of foreign public 
officials as an offence. The Act also extends to acts of bribery committed outside Malaysia by 
Malaysian citizens and permanent residents. As no ted by the authorities, the MCCA has adopted a 
three-pronged strategy to combat corruption, th rough investigations, prevention, and community 
action. To enhance its effectiveness it has recently undertaken internal structural changes to 
promote operational efficiency as well as measures  to prevent corruption. The latter have included 
encouraging companies to sign onto the Corporate Identity Pledge (as at June 2013, 179 companies had signed-on); civil society outreach programmes, and tender monitoring. The 
prosecution of corruption offences is the responsi bility of the Attorney-General, some of whose 
staff are attached to the MACC's Legal and Prosecution Division. The MCCA has ratified the United Nations Convention on Corruption (UNCAC) and recently submitted a Self-Assessment Check List 
under the UNCAC Review Mechanism; according to th e authorities, Malaysia has met with most of 
the Convention's requirements.
31 The MCCA is involved in various bilateral, regional, and 
international cooperation efforts to combat corruption. In 2013, the Government made it 
mandatory for each ministry to appoint a certified integrity officer (CeIO) in order to promote good governance within the federal administration.  
2.5.2  Foreign investment regime 
2.35.  Over the review period, the Government has continued to autonomously reduce or eliminate 
foreign investment restrictions in a number of services subsectors, and has bound the status quo of market access in the accountancy sector where no FDI thresholds were previously in place 
(see section 4.7). While a full list of remaining FDI caps across all sectors of the economy was not 
                                               
29 State governments and local authorities may follow the policy on a voluntary basis. 
30 For more information, see National Policy on th e Development and Implementation of Regulations, 
2013. Viewed at: http://www.mpc.gov.my/home/?sstr_lang=en&cont=ds&id=2&item=d8&s_item=8i19&t=3  
and the Best Practice Regulation Handbook, 2013. Viewed at: 
http://www.mpc.gov.my/home/?sstr_lang=en &cont=ds&id=3&item=d8&s_item=8i19&t=3 .  
31 For more information about Malaysia's self-assessment, see UNOCD online information. Viewed at: 
http://www.unodc.org/unodc/treaties/CA C/country-profile/profiles/MYS.html .  WT/TPR/S/292 • Malaysia 
 
- 36 - 
 
  available, economic activities where FDI limits were identified in the context of this Review were in 
the areas of: fisheries, energy, telecoms, air transport, and maritime transport.  
2.36.  As set out in the Guidelines on the Acquisition of Properties, foreign investors are not 
allowed to acquire properties below RM 1,000,000 increased from RM 500,000 as set out in 
the 2014 Budget Speech.32  
2.37.  Malaysia has various policies in place to support the ethnic Malay community (Bumiputera), 
which accounts for around 67% of Malaysia's total population. The policies that directly affect FDI 
are: (a) a requirement that the purchase by foreigners of property valued at RM 20 million or more 
from Bumiputeras and government agencies must be approved by the Economic Planning Unit, subject to the conditions set out in the Guidelines on the Acquisition of Properties; and (b) a requirement that foreign-owned companies with predominantly Malaysian-based operations that 
are seeking listing on the Malaysian Stock Exchange must allocate at least 12.5% of their initial 
public offering (enlarged issues and paid-up capita l) to Bumiputera investors at the point of their 
listing.  
2.38.  The authorities indicated that foreign participation in public-private-partnership projects 
may be considered in certain cases, where: (a) their expertise is needed to upgrade efficiency, and such experience is not available locally; (b) their participation is necessary to promote the export 
market; (c) the supply of local capital is insufficient to absorb the shares offered; and (d) the 
nature of the business requires global linkages and international exposure. They further noted that, in general, foreign participation in any privatized entity is limited to a maximum of 25% of its share capital. For projects of strategic and national importance, foreign ownership has to be 
widespread so as to ensure that  no single foreign party would have influence on the company. 
2.39.  There are no incentives in place (fiscal or otherwise) available solely to foreign investors. 2.40.  As at October 2013, Malaysia had signed 74 investment guarantee agreements (IGAs), 
64 of which were in force. One new IGA, with Syria, entered into force over the review period.
33 
Most of Malaysia's RTAs also contain investment provisions.34 Malaysia has double-taxation 
agreements in force with 70 jurisdictions.35 Since 2010, new agreements entered into force with 
Germany and Lao PDR (in 2010), and an agreement with Senegal was signed in 2010 but has not 
yet entered into force. 
                                               
32 Guidelines on the acquisition of properties viewed at: http://www.epu.gov.my/en/guideline-on-the-
acquistion-of-properties .  
33 Full list of the IGAs that Malaysia has signed, as well as the texts of the respective agreements 
viewed at: http://www.miti.gov.my/cms/content.jsp?id=com.tms.cms.section.Section_4ba7b2f7-c0a8156f-
d9c0d9c0-ceda1f2f .  
34 There are no investment provisions in ASEAN's RTAs with India and Korea, or in the bilateral RTA 
between Malaysia and Chile. 
35 Full list of double taxation agreements viewed at: 
http://www.mida.gov.my/env3/index. php?page=double-taxation-agreement .  WT/TPR/S/292 • Malaysia 
 
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  3  TRADE POLICIES AND PRACTICES BY MEASURE 
3.1  Introduction 3.1.  Since its previous Trade Policy Review in 2010, Malaysia has continued to liberalize its trade 
and trade-related policies, mainly through unilateral tariff cuts, notwithstanding the global 
economic crisis. Further reforms were made, including in intellectual property rights protection, 
competition policy, and consumer protection.  
3.2.  The tariff remains a main trade policy instrument and a minor source of tax revenue (1.3% of 
total tax revenue in 2012). Following the adoption of the HS 2012 nomenclature, Malaysia's 
customs tariff was streamlined by reducing the number of tariff lines (9.3% less). Almost all tariff lines remain ad valorem . Nonetheless, the tariff involves a multiplicity of rates whose number 
remains virtually unchanged since 2009. As a result of unilateral tariff cuts during the period under 
review the average applied MFN tariff rate dropped from 7.4% in 2009 to 5.6% in 2013. Although 
the average applied MFN tariff on industrial products has dropped, it remains more than two times higher than the average tariff level affecting agricultural products (WTO definition). Tariff 
dispersion was reduced, though tariff escalation remains pronounced. Peak ad valorem  rates apply 
to agriculture (WTO definition). Tariff rates range from zero to 90% although non- ad valorem  
tariffs tend to conceal higher peak rates of up to 1,439.2% (alcoholic beverages, tobacco refuse); 
80% of rates were 10% or below in 2013. Malaysia continues to maintain tariff-rate quotas related 
to its multilateral agricultural market-access commitments; in-quota rates range between zero (round cabbages) and 25%, and out-of-quota rates from 20% to 90% (round cabbages). While more than 80% of tariff rates are bound, the average gap between applied and bound MFN rates 
appears to have risen to at least 10 percentage points, thus allowing considerable leeway for 
raising applied tariffs, though this does not seem to have occurred during the period under review. The gap between Malaysia's simple average applie d MFN tariff rate and the average preferential 
rate on imports from preferential or FTA trading partners was also reduced. 
3.3.  Malaysia has strengthened trade facilitation by, inter alia,  further shifting customs clearance 
from clearance-based controls to post-clearance audit controls; its ease of trading across borders 
remains highly ranked in international comparisons. A gazetted price system continues to be used 
to help determine the customs value of new motor vehicles. 
3.4.  Import prohibitions are maintained mostly for national security, religious, and environmental 
reasons. A considerable portion of Malaysia's tariff lines remains subject to import licensing, most 
of which is non-automatic and is used as a trade and industrial policy tool for, inter alia,  regulating 
the flow of imports and promoting selected strate gic industries. The import licensing system of 
"approved permits" (AP) governing the importation and distribution of foreign-built or assembled 
cars, trucks, and motorcycles also remains in place. Although Malaysia's recourse to anti-dumping 
action dropped markedly, with no cases initiated from 2007 to 2011, three investigations were launched in 2012 on imports of steel wire rod, biaxially oriented polypropylene film, and hot rolled 
coils from 11 countries (virtually all of Asian origin).  
3.5.  Export taxes (1.5% of total tax revenue in 2012) and/or restrictions, which are applied to 
certain goods (e.g. timber), continue to, inter alia,  discourage exports of certain commodities and 
essential goods and reduce their domestic prices, thereby ensuring adequate domestic supplies 
and assisting downstream processing of the products concerned. Exports of price-controlled 
essential goods (i.e. wheat flour, diesel, petrol RON 95, liquefied petroleum gas, sugar, and cooking oil), four of which are subsidized, are prohibited unless approval is granted. Import duty 
exemptions or drawbacks for intermediate goods used  in the production of exports are in place so 
that the import duties do not feed through to become implicit taxes on exports. Support is available for exports of certain fresh and dried fr uits, fresh and dried flowers, ornamental plants 
and ornamental fish, and manufactures in the form of statutory income tax exemptions ranging 
from 10% to 50% of the value of increased exports, depending, inter alia , on the activity, 
value-added and/or ownership. Similar exemption of statutory income tax equivalent to 50% of the value of increased export is available to co mpanies in selected services sectors. Promotion 
measures remain in place for export processing zones, involving local-content requirements 
since 2011; concessionary credits, insurance, and guarantees; and government-sponsored promotion and marketing assistance.  WT/TPR/S/292 • Malaysia 
 
- 38 - 
 
  3.6.  Measures involving grants, tax concession s, and low-interest loans continue to support 
production and trade of various agricultural and manufactured products, and encourage SMEs, 
R&D, and environmental-protection activities. Indi vidual taxi owners and car rental operators are 
exempt from the payment of excise duty on the purchase of domestically produced "national cars"; 
tour operators benefit from a 50% reduction of this duty on domestically assembled 
four-wheel-drive vehicles. A rationalization effort to reform the subsidies regime on gasoline, cooking gas, electricity and road tolls has accomplished little so far; renewed emphasis was placed 
on these efforts in October 2013.  
3.7.  Improvement and development activities on standards remain among Malaysia's priorities for 
achieving developed-nation status by 2020. During the period under review, the share of compulsory Malaysian standards and standards aligned with international standards continued to 
rise. Regulatory and institutional improvements were undertaken in SPS. Further emphasis has 
been placed, inter alia,  on halal certification and biosafety issues.  
3.8.  State involvement in the economy persists in numerous areas (e.g. oil, gas, key strategic 
utilities, and services) although competition challenges for government-linked companies (GLCs) 
were intensified due to several developments. Efforts to improve their productivity seem to have borne fruit for some of them. Padiberas Nasional Berhad maintains its sole right to import rice and 
its monopoly was extended for ten years until 2021. Preferential government procurement 
procedures and expanded countertrade/offset requirements remain an instrument of industrial policy to favour locally owned businesses; international tenders are invited only if goods and services are not available locally. GLCs are encour aged to purchase from locally owned businesses. 
Malaysia became an observer to the WTO Agreement on Government Procurement in 2012, and 
efforts were undertaken to improve transparency and "integrity pacts" in its procurement procedures.  
3.9.  During the period under review, signif icant changes were brought to the legal and 
institutional framework governing competition policy, which also covers GLCs but not certain anti-competitive practices, agreements or activiti es (e.g. energy and communications). Price and 
supply controls over essential goods and services were reinforced, and sugar price subsidies were 
abolished. Consumer protection was strengthened in several areas (advertisements, personal data protection, credit sales, consumer redress). Su bstantial progress was made in further improving 
the regulatory framework of corporate governance by, inter alia,  raising standards in this area.  
3.10.  Malaysia strengthened its intellectual prop erty regime by passing significant amendments to 
its patent, industrial designs, copyright, and trad emark laws and/or regulations, and expanding its 
international commitments. Its proactive enforcement approach was enlarged with new initiatives 
(e.g. Basket of Brands (BOB) scheme).  
3.2  Measures Directly Affecting Imports 3.2.1  Customs procedures, customs valuation, and rules of origin  
3.2.1.1  Registration, documentat ion, and clearance requirements 
3.11.  Since 2010, there have been no changes in Malaysia's import registration requirements. 
Import declarations must be made by consignors, customs brokers or corporations for customs brokerage/clearance. Additional declarations are required for taxable goods valued over 
RM 20,000. The commercial invoice and duplicates of  the bill of lading must accompany the import 
declaration. Where applicable, a detailed packing list, import approval document (e.g. permit, licenses/certificates), sanitary and phytosanitary certificate, and a certificate of origin for goods 
subject to tariff preferences should be submitted.  No fees are imposed for customs procedures by 
the Royal Malaysian Customs Department (RMCD).  
3.12.  Customs clearance has been fully automated since 2007; import declarations, duty 
assessment, payment of duties, and custom s release are submitted electronically.
1 According to 
the authorities, all  imports have benefited from electronic customs clearance since 2010. As of 
                                               
1 Currently, the RMCD has no facility to enable subm ission of other supporting documents (e.g. invoice, 
bill of lading) electronically with the import/export declaration. Most import licences can be submitted electronically with customs declarations. WT/TPR/S/292 • Malaysia 
 
- 39 - 
 
  November 2013, 26 of the 44 permit issuing agencies were issuing e-permits (i.e. paperless). 
Malaysia has continued to shift customs clearance from clearance-based controls to post-clearance audit controls based on risk management results subsequent to the release of the cargo from Customs' custody.
2 N o  d a t a  o n  t h e  s h a r e  o r  m a i n  t y p e s  o f  i m p o r t s  t h a t  h a v e  b e e n  s u b j e c t  t o  
post-clearance audit controls since 2010 are available. By November 2013, RMCD was in the final 
stage of negotiating a mutual recognition arrangement (MRA) with Japan Customs to facilitate trade between Malaysia and Japan.  
3.13.  In 2012, Malaysia ranked 11
th (12th in 2011, 37th in 2010) out of 185 economies on the ease 
of trading across borders; according to World Ba nk/IFC, importing the same container of goods 
required on average 6 documents, took 8 days  (10 in 2010) and cost US$420 (US$450 in 2010).3 
In 2012, cargo clearance (i.e. from shipment arrival to release) took on average 3.63 days 
(3.2 days in 2007) for sea cargo and 2.14 days for air cargo (0.8 days in 2007); customs 
formalities (e.g. registration, inspection and collection of duties) took 1.25 hours (13 hours in 2007) for sea cargo and 1.25 minutes (30 minutes in 2007) for air cargo. For importers registered 
as authorised economic operators (AEO), whic h replaced the Customs Golden Clients (CGCs)
4 in 
January 2010, the average time from the submission of customs declaration to the release of goods was 15 minutes in 2012 (same as in 2007 for CGCs); currently 48 companies are accredited 
as AEOs. 
3.14.  Malaysia has been a party to the World Customs Organization Revised Convention on the 
Simplification and Harmonization of Customs Pr ocedure (Revised Kyoto Convention, RKC) since 
30 June 2008. In line with its RKC obligations it undertook a time release study (TRS) in 2011, and 
a 2012 TRS was to help redefine customs clearance procedures and provide statistical evidence 
towards improving the clearance process, as well as to measure the impact and progress of the customs reform and modernization programme to be undertaken.
5 The overall TRS findings 
indicate that the Malaysian time release result is not yet fully consistent with all RMCD's 
commitments under its client charter. TRSs identified problems in areas relating to customs regulations and legislation, delays in paymen t of duty/tax, removal time of perishable 
consignments arriving by air, timing of submission  of customs declarations, time for responding to 
rejections and queries raised by Customs, late physical removal of goods after release of customs documentation, minor process inefficiencies, no incr ease in RMCD resources, and longer processing 
time of consignments subject to preferential tariff rates.  
3.15.  Smuggling remains a concern and is due to various reasons including duties or tax evasion, 
circumvention of prohibitions, infringement of intellectual property rights, and the release of a large proportion of cargo traffic following risk-management evaluation without document 
examination or physical inspection. Between 2010 and 2012, the value of seized merchandise rose 
by 18.7% to RM 602.9 million, but the estimated forgone tax revenue dropped by 15.5% to RM 435 million, as some of these items are seemingly prohibited items (e.g. illegal drugs), thus 
not subject to duties and taxes. The main individu al product categories, in terms of seizure value, 
were vehicles (mainly from the EU and Japan), cigarettes (Indonesia, East Asia, China), liquor 
(the EU and East Asia), and firecrackers, a controlled item (Thailand and China); vehicle smuggling rose both in terms of value and forgone tax revenue, inter alia,  due to their high taxation level. 
Smuggling of certain subsidized essential goods under price controls (e.g. sugar, fuels 
(sections 3.4.2.2 and 3.4.4.2)), and endangered wildlife (e.g. tiger parts, ivory, reptiles) appears to remain important.
6 To tackle smuggling the RMCD took measures such as: enhancing risk 
assessment in cargo screening and targeting; deploying x-ray scanners; increased enforcement 
activities and operations; capacity building of enforcement officers; and intelligence sharing and 
cooperation with domestic and international agencies.  
                                               
2 More information about post-clearance audit controls is contained in UNCTAD (2011). 
3 World Bank (2013b). 
4 The CGC system, introduced in September 2004, for companies with records of high legal, regulatory, 
and security compliance, offered approved companies simplified and expeditious clearance, drawback, and 
refund claims through self-a ccounting, and deferred duty payment. The AEO was a response to security threats 
posed by the international trade supply chain. 
5 WTO Trade Facilitation online information, "Case Studies and Reports by To pic: Time Release Study 
Malaysia prepared by Dr. Roslan Mohamed, Assistant Director of Customs, 8 May 2012". Viewed at: http://www.wto.org/english/tratop_e/tradfa_e/casestudies_reports_e.htm  [13 February 2013]. 
6 New Straits Times,  "Cargo scanning machines to deter smuggling", 10 November 2012. Viewed at: 
http://www.nst.com.my/nation/general/cargo-scanning-machines-to-deter-smuggling-
1.172805#ixzz2KnK5XdHO  [13 February 2013]. WT/TPR/S/292 • Malaysia 
 
- 40 - 
 
  3.16.  Malaysia's appeals system allows for complaints against Customs decisions to be made to 
the Director General of Customs; further a ppeals may be lodged with the Customs Appeal 
Tribunal, the Minister of Finance, and the High  Court. In 2013 (January-October), there were 
35 appeals to Director General of Customs and the Minister of Finance (29 in 2012, 23 in 2008) 
17 to the Customs Appeal Tribunal (52 in 2012, 11 in 2008), and none to the High Court (1 each 
in 2008 and 2012).  
3.2.1.2  Customs valuation 
3.17.  Since the previous Review of Malaysia, ther e has been no change in the basic framework of 
its customs valuation system. Valuation of goods for customs purposes is largely determined in accordance with the WTO Agreement on Customs Valuation principles and provisions. Under the current Customs (Rules of Valuation) Regulation
7, imports are valued at their c.i.f. price. The 
transaction value based on the price actually paid or to be paid is used for about 95% of imports. 
When this method cannot be used, valuation is based on the transaction value of identical or similar goods, the deductive value, the computed value or flexible valuation.
8  
3.18.  Clause 11 of the Customs (Rules of Valu ation) Regulation 1999 empowers the Minister of 
Finance to determine the minimum value of goods. The authorities indicated that this Clause has never been used. The Customs (Values of Imported  Completely Built-up motor vehicles (New)) 
Order 2006 empowers the Minister of Finance to fix the value of imported CBU cars, as deemed 
appropriate, in accordance with Section 12 of the Customs Act 1967, with a view to tackling under-declaration. According to the authorities, th is option has not been used during the review 
period as the value determined in the Order takes the form of a "gazetted value", which is 
accepted as the transaction value for the commercial importers (AP holders, sections 3.2.3.2 
and 4.6), while for individual importers the WT O valuation methods apply. Commercial importers 
must submit information, including the transaction value of CBU cars, to the Valuation Section of 
Customs Headquarters. A committee comprising officers from the Ministry of Finance, the Ministry 
of International Trade and Industry (MITI), and RMCD reviews all documents and prices submitted 
before recommending the "gazetted value" to the Minister for approval.
9 According to the 
authorities the "gazetted price system" is a measure to assist in determining the customs value of 
any dutiable vehicles rather than a non-tariff barrier. No data on cases of under-invoicing/under-declaration since 2010 were available from the authorities.  
3.2.1.3  Rules of origin 
3.19.  Malaysia has no national law governing rules of origin (ROO) for imports; it does not 
maintain any non-preferential rules of origin. Pref erential rules apply to imports under preferential 
trading arrangements and FTAs (sections 3.2.2.6 and 2.4.2). Malaysia recognizes that ROOs need 
to be simple, easy to comply with, and consistent across its FTAs so as to ensure that preferential 
tariffs are widely used and benefit the small and medium enterprises (SMEs) (section 3.3.1). The ROOs in all its FTAs are generally based on the twin criteria of the wholly obtained or produced, for 
natural products (i.e. agriculture products, live animals, minerals, etc.), and substantial 
transformation. Substantial transformation compri ses: the value-added (VA) method; the change 
in tariff classification (CTC) at HS 4-digit (change in tariff heading - CTH) or 6-digit (change in tariff sub-heading - CTSH) level; specified process of manufacture involving products such as 
textiles and chemicals; or a combination of the above.
10 
3.2.2  Tariffs 3.20.  On 31 October 2012, Malaysia introduced the 2012 version of the Harmonized System of 
Tariff Classification (HS), consisting of 9,417 nine-digit lines (972 less lines than the 
                                               
7 The Customs (Rules of Valuation) Regulation 1999, which has been in force since 1 January 2000. 
8 Royal Malaysian Customs Department  online information. Viewed at: 
http://www.customs.gov.my/index.php/bm/fasilitasi-perdagangan/kastam/105?start=2 . 
9 If the committee has no reason to doubt the trut h and accuracy of the declared customs value, the 
committee will approve the declared value as transaction value. However, in case of  doubt, the committee will 
use another valuation method as set out in by the national legislation. For individual importers, the person 
importing the vehicle has bought and used it prior to  importation therefore the transaction value method 
cannot be used and the RMCD would use another method based on the order set by the national legislation. 
10 Preferential rules of origin are available at: http://www.miti.gov.my/cms/index.jsp . WT/TPR/S/292 • Malaysia 
 
- 41 - 
 
  2009 schedule)11 for MFN and preferential tariffs; and the 2012 version of the ASEAN Harmonised 
Tariff Nomenclature (AHTN) classification system, consisting of 12,337 ten-digit lines (7 more than in 2009) for preferential tariffs under intra-ASEAN trade. Malaysia is transposing its preferential tariff commitments into HS12; by November 2013, it  had completed transposition relating to three 
FTAs (ASEAN, ASEAN-Australia-New Zealand, Malays ia-Australia), while transposition for another 
nine agreements was pending MITI's decision on  issues related to merging tariff lines.  
3.21.  The tariff schedule is reviewed annually, main ly as part of the national Budget process. In 
addition regular reviews of the tariff structure an d tariff rates are held through dialogues between 
the authorities and the business community. The Special Advisory Committee on Tariffs (SACT), under MIDA, receives and considers applications for tariff review, which may then be announced in the annual Budget.  
3.2.2.1  Applied MFN tariffs 
3.22.  The tariff structure has changed slightly since the last Review of Malaysia. As a result of the 
tariff changes involving, inter alia,  numerous unilateral tariff reductions, the 2013 simple average 
(unweighted) MFN tariff dropped to 5.6% (7.4% in 2009) (Table 3.1).
12 According to the 
authorities, under the 2009 and 2011 Budgets import duties were abolished for certain items or reduced, while some products were exempted from duties to curb inflationary pressures and 
support shopping activities; these changes affected about 300 tariff lines covering food products, 
electric goods, "tourism products" (cameras, watches, perfumes), and consumer products. No changes to the customs tariff are envisaged under the 2014 Budget. Tariff protection varies substantially across and within sectors, averagin g 2.9% for agricultural products and 6% for 
industrial goods in 2013 (WTO definition).
13 Average tariffs are highest for articles of stone and 
transport equipment both at a 17.3%, and plastics and rubber at 13.4% (Chart 3.1, Table A3.1). By according varied and substantial levels of protection to selected industries, tariffs distort 
resource allocation and competition. Reducing high tariffs (mainly the out-of-quota agricultural 
duties (section 3.2.2.3)) would improve Malaysia's resource allocation and national welfare. 
Table 3.1 Malaysia's tariff structure, 2009 and 2013
 
(%, unless otherwise indicated) 
  MFN applied Final 
bounda 2009 2013 
Bound tariff lines (% of all tariff lines) .. .. 80.6 
Simple average rate 7.4 5.6 15.6 
Agricultural products (HS01-24) 2.7 2.5 11.2 
Industrial products (HS25-97) 8.0 6.2 16.5 
WTO agricultural products 2.8 2.9 11.0 
WTO non-agricultural products 7.9 6.0 16.5 
Duty-free tariff lines (% of all tariff lines) 60.3 64.6 5.7 
Simple average rate of dutiable lines only 18.6 15.9 16.6 
Tariff quotas (% of all tariff lines) 0.2 0.2 .. 
Non-ad valorem  tariffs (% of all tariff lines) 0.8 0.9 4.7 
Domestic tariff "peaks" (% of all tariff lines)b 11.8 16.8 .. 
International tariff "peaks" (% of all tariff lines)c 22.2 16.8 .. 
Overall standard deviation of tariff rates 11.7 9.5 .. 
Coefficient of variation of tariff rates 1.6 1.7 .. 
Nuisance applied rates (% of all tariff lines)d 0.1 0.1 0.5 
Total number of tariff lines 10,389 9,417 6,273 
Ad valorem  rates 4,045 3,255 5,628 
                                               
11 This number largely reflects a reduction of 513 tariff lines under HS Chapter 44 (wood).  
12 The tariff analysis follows the Secretariat's practice  of including out-of-quota duties for tariff quotas 
(i.e. excluding the in-quota rate) and the ad valorem  part of compound- and alternat e-type duties when official 
ad valorem  equivalents are unavailable. As out-of-quota rate s are much higher than in-quota rates, this is 
likely to overstate tariff protection where no ou t-of-quota imports occu r. However, using the ad valorem  
component of Malaysia's alternate and compound tariffs (the former applied under the "whichever is the 
highest" rate principle) will slightly understate tariff protection when the alternate specific rate is operative.  
13 WTO definition of industrial products covers all no n-agricultural products, i.e. products not covered by 
the WTO Agreement on Agriculture. WTO agricultural products include all processed and unprocessed agricultural commodities (HS Chapters 1 to 24, less fish  and fish products, plus so me additional HS items). WT/TPR/S/292 • Malaysia 
 
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    MFN applied Final 
bounda 2009 2013 
Duty free 6,264 6,079 360 
Specific rates 39 41 89 
Compound rates 36 40 164 
Alternate rates 5 2 32 
.. Not available. 
a  Implementation of the U.R. was achieved in 2005. Calculations for final bound rates are taken from 
the CTS database. The final bound schedule is based on HS02 nomenclature and consists of 
7,799 tariff lines, of which 6,273 are bound (including partially bound rates). Calculations are based on the 6,273 bound lines only. 
b  Domestic tariff peaks are defined as those exc eeding three times the overall average applied rate. 
c  International tariff peaks are defined as those exceeding 15%. d  Nuissance rates are those greater than  zero, but less than or equal to 2%. 
Note: Calculations exclude in-quota and specific rates and include the ad valorem  part of compound and 
alternate rates. The 2009 tariff is based on  HS02 nomenclature, and 2013 tariff on HS12. 
Calculations for averages are based on national tariff line level (9-digit). 
Source: WTO Secretariat calculations, based on da ta provided by the authorities of Malaysia. 
Chart 3.1 Average applied MFN tariff rates, by HS section, 2009 and 2013 
0.02.55.07.510.012.515.017.520.0
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21Per cent
01   Live animals & products  
02   Vegetable products03   Fats & oils      
04   Prepared food, etc.
05   Mineral products
06   Chemicals & products07   Plastic & rubber
08   Hides & skins09   Wood & articles
10   Pulp, paper, etc.
11   Textiles & articles
12   Footwear, headgear13   Articles of stones
14   Precious stones, etc.15   Base metals & products
16   Machinery
17   Transport equipment
18   Precision instrument19   Arms & ammunition
20   Miscellaneous manufacturing21   Works of art, etc.Average 2009
(7.4%)
Average 2013
(5.6%)MFN 2009 MFN 2013
 
Note: Calculations exclude specific rates and include the ad valorem  part of alternate and compound rates. 
Source: WTO Secretariat calculations, based on da ta provided by the Malaysian authorities.  
3.23.  Over 99% of tariffs are ad valorem  duties. The complexity of the tariff structure remains 
relatively unchanged since 2009; there are some 51 (52 in 2009) different rate bands, including 
duty-free rates (19 ad valorem , 19 specific, 11 compound, 2 alternate duties). Specific, compound, 
and alternate duties apply to 83 nine-digit HS12  tariff lines accounting for 0.4% (pineapples, 
alcoholic beverages, certain tobacco), 0.4% (tropical fruits, certain tobacco, alums, iron/steel 
scrap ingots), and 0.02% (creped/crinkled paper, automotive air conditioners) of total tariff lines. 
Ad valorem  tariff rates still range from zero to 60% (glazed ceramic paving, hearth or wall tiles) 
for industrial products and 90% (round cabbage) for agricultural products. During the period under 
review, tariff reductions affected, inter alia,  essential oils and perfumes (HS Chapter 33), leather 
articles (HS Chapter 42), clothing (HS Chapters 61, and 62), articles of iron and steel, and jewellery. More than 80% of rates are 10% or be low (Chart 3.2, Table A3.1). Rates of over 30% 
now apply to 0.6% of tariff items. The Malaysian tariff could be further rationalized, for example, 
by reducing the number of rate bands. WT/TPR/S/292 • Malaysia 
 
- 43 - 
 
  Chart 3.2 Distribution of MF N tariff rates, 2009 and 2013 
(60.3%) 
(7.9%) (6.6%)
(2.6%)(10.4%) 
(3.6%)   (5.8%) 
(2.5%)(64.6%)
(9.1%)
(7.0%)
(2.2%)(8.6%)
(2.8%)(4.7%)
(0.6%)
05001,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5007,000
Duty free >0-5 >5-10 >10-15 >15-20 >20-25 >25-30 >30Number of tariff lines
Tariff rates MFN 2009
MFN 2013
 
Note: Figures in parentheses denote the share of total lines. Calculations exclude specific rates and include 
the ad valorem  part of alternate and compound rates. The 2009 and 2013 tariff schedules consist, 
respectively, of 10,389 and 9,417 tariff lines. Totals do not add to 100% due the exclusion of specific rates, representing 0.4% for both 2009 and 2013. 
Source: WTO Secretariat calculations, based on data provided by the Malaysian authorities. 
3.24.  Non- ad valorem  duties, which are maintained almost exclusively on agricultural products 
(79 of the 83 nine-digit HS tariff lines) to protect small and rural farmers, tend to conceal high tariff protection. The level of applied non- ad valorem  tariff protection could be considerably higher 
than the level afforded by ad valorem  rates. According to WTO Secretariat calculations, in 2013 
the ad valorem  equivalents (AVEs) of the specific part of specific compound and alternate duties 
ranged from 0.4% (clove cigarettes) to 1,439.2% (alcoholic beverages, tobacco refuse), and 
29 AVEs exceeded the highest ad valorem  rate (90%) of the customs tariff schedule
14; these 
non-ad valorem  duties form part of Malaysia's WTO tariff binding commitments. 
3.2.2.2  MFN tariff dispersion and escalation 3.25.  Following the adoption of the HS12 and unilateral tariff reductions undertaken during the 
period under review, tariff dispersion changed in  a positive manner as international tariff peaks 
and standard deviation were reduced significantl y (section 3.2.2.1, Table 3.1, and Chart 3.3).
15 On 
the other hand, the overall pattern of tariff escalation remains in general pronounced and changed 
little since 2010, except for textiles and leather, for which the average applied tariff for fully 
processed goods is now lower than for semi-processed goods (Chart 3.3); for wood and furniture, average tariff protection for first stage of processing and fully processed items remains more than 
ten times higher than for semi-processed products.  
                                               
14 AVEs were calculated on 70 of 83 nine -digit HS tariff lines subject to non- ad valorem  rates. In all 
alternate duty cases the ad valorem  component was higher than the specific duty part of the alternate rate. 
These calculations are based on the 2012 import value and volume supplied by the Malaysian authorities. 
When these AVEs are taken into consideration for the tariff analysis (in Table 3. 1), the simple average MFN 
applied rate is 6.9%. In 2009, the simple average of AVEs for 46 out of 80 non- ad valorem  tariff lines was 
392%. Three tariff lines, for bananas and tobacco refuse, had AVEs exceeding 1,000% (WTO document 
WT/TPR/S/225/Rev.1, 15 February 2010).  
15 The magnitude of the welfare loss associated with the imposition of tariffs is not only a function of the 
mean tariff, but also depends on the relative magnitudes  of tariffs across different products and sectors. The 
higher the dispersion, the larger the distortionary effect s of tariffs. Two indicators of the degree of dispersion 
are tariff "spikes" or peaks, and th e standard deviation of tariffs from their mean. A large number of peaks 
implies a highly differentiated tariff st ructure, whereas a small number points  to a more uniform or "flat" tariff 
structure. The higher the standard deviation, the larger the distortions in the patterns of domestic production 
and consumption caused by tariffs (OECD, 1999). WT/TPR/S/292 • Malaysia 
 
- 44 - 
 
  Chart 3.3 MFN tariff escalation by tw o-digit ISIC industry, 2009 and 2013 
0.02.55.07.510.012.515.017.520.022.525.0
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishingChemicals Non-
metallic
mineral
productsBasic metal Fabricated
metal
products
and
machineryOther0.02.04.06.08.010.012.014.016.018.020.022.0
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishingChemicals Non-
metallic
mineral
productsBasic metal Fabricated
metal
products
and
machineryOtherAverage applied rate in manufacturing
(8.7%)Per cent
First stage of processing Fully processed Semi-processedPer cent
Average applied rate in manufacturing
(6.4%)2009n.a.
n.a.n.a.n.a.2013
 
n.a. Not applicable. 
Note: Calculations exclude in-quota and specific rates and include the ad valorem  part of alternate and 
compound rates. The 2009 tariff is based on HS02 nomenclature, and the 2013 tariff on HS12. 
Source: WTO Secretariat calculations, based on da ta provided by the Malaysian authorities.  
3.2.2.3  Tariff rate quotas 
3.26.  In response to requests by domestic small producers, Malaysia continued to maintain 
tariff-rate quotas (TRQs) for 20 (18 HS07 items until 2011) HS12 tariff lines in 2013, including live swine and poultry, poultry and pork meat, liquid  milk and cream, and round cabbage. In-quota 
rates ranged from zero (round cabbages) to 25% (pork), and out-of-quota rates from 20% to 90% 
(round cabbages) (section 4.2.3).
16 In 2011, a large proportion of these quotas were unfilled, and 
there were no imports of live swine and chicken/du ck eggs for hatching, apparently due to lack of 
demand. The sole items for which imports exceeded the quota volume were day-old poultry, 
                                               
16 WTO document WT/TPR/S/225/Rev.1, 15 February 2010; EIU (2012a); and USTR (2012a). WT/TPR/S/292 • Malaysia 
 
- 45 - 
 
  pork/poultry meat, and poultry cuts and offal. These TRQs form part of the 73 HS96 nine-digit 
level lines contained in Section 1 B of Malaysia's Schedule XXXIX but are not entirely comparable 
with current tariff lines (at HS07 or HS12) due to the nomenclature changes since then. 
Nevertheless, out-of-quota rates seem in line with WTO commitments and the actual quota 
volumes appear higher than those contained in the Schedule. Malaysia's latest WTO notification in 
relation to TRQs dates back to May 2005 and covers calendar years 1997 and 1998.17 The 
authorities indicated that WTO TRQs notifications are pending due to the HS transposition exercise, 
which affects data collection; Malaysia will update these notifications once the transposition of 
binding commitments from HS96 to HS02 and HS07 is  finalized (section 3.2.2.4). Prior to TRQ 
re-activation (as from April 2008), the applied MFN tariff rate for these products is claimed to have been zero. Quotas are allocated on a first-come-first-served basis to importers.  
3.2.2.4  Tariff bindings 
3.27.  It is not possible to accurately compare Malaysia's bound tariff rates with its applied tariff 
rates as the respective tariff schedules are in different nomenclatures; bound tariffs are in HS02 
and applied tariffs are in HS12. The transposition of tariff commitments has not yet been finalized. 
3.28.  According to the WTO's Tariff Profile calculations, on a six-digit HS02 average basis, 84.3% 
of all tariff lines, covering all agricultural tariff lines and 81.9% of industrial tariff lines (WTO 
definitions), are bound. Under CTS calculations, based on the national tariff nomenclature 
nine-digit HS02, 80.6% of all tariff lines were bound.
18 The final overall bound rate (i.e. for 2005) 
was 15.6% (CTS calculations) or 23% (Tariff Profile).19 The average bound rate was 11.0% (CTS) 
or 66.8% (Tariff Profile) for agricultural products (WTO definition) and 16.5% (CTS) or 14.9% 
(Tariff Profile) for non-agricultural products. Implementation of these commitments was achieved 
in 2005. Following the unilateral tariff reductions during the review period (section 3.2.2.1), the overall gap between the simple average MFN app lied tariff rate and the simple average bound 
tariff rate could have risen from 8.2 to 10 percentage points (CTS) or from 15.6 to 
17.4 percentage points (Tariff Profile). The gap could be 8.1 (CTS) or 63.9 (Tariff Profile) percentage points for rates affecting agricultur al items (WTO definition), and 10.5 (CTS) or 
8.9 (Tariff Profile) percentage points for industrial items. This gap and the relatively high 
proportion of unbound lines continue to provide ample scope for the authorities to raise applied tariffs, thus allowing for a potentially high degr ee of unpredictability over tariff barriers facing 
imports in Malaysia's market; no such increases appear to have occurred during the period under 
review.  
3.29.  Since 1 January 2007, Malaysia has benefited from collective waivers for the introduction of 
HS07 changes in its Schedule XXXIX of tariff concessions.
20 Malaysia submitted the transposition 
of its commitments to HS02 and HS07 in August 2013; in November 2013, the verification process 
was still under way. In addition, as from January 2012 Malaysia has benefited from a collective waiver for the introduction of HS12 changes in its Schedule of tariff concessions
21; as of November 
2013, Malaysia was in the process of completing this transposition exercise and will notify the 
outcome to the WTO in the course of 2014. 
3.2.2.5  Duty concessions/exemptions 3.30.  The application of import duty and sales tax relief through duty and tax concessions and 
exemptions has not changed since the last Review of Malaysia. They cover raw materials and 
components used in the manufacture of goods for export, and for machinery and equipment not available in Malaysia but used directly in the manufacturing process.
22 Full exemptions from sales 
tax and excise duties are granted to locally purc hased machinery/equipment. Duty exemptions are 
granted to local as well as foreign-owned manufacturing companies. According to the authorities, 
                                               
17 WTO document G/AG/N/MYS/12, 4 May 2005. 
18 WTO Statistics database. Viewed at: 
http://stat.wto.org/TariffProfile/WSDBT ariffPFView.aspx?Language=E&Country=MY ; and WTO document 
WT/TPR/S/225/Rev.1, 15 February 2010. 
19 The reason for such a gap between CTS and Tariff Prof ile calculations is that the latter include AVEs.  
20 WTO document WT/L/833, 5 December 2011; and WT/L/874, 14 December 2012.  
21 WTO document WT/L/834, 5 December 2011; and WT/L/875, 14 December 2012. 
22 Duty exemptions and concessions are contained in : Customs Duties (Exemption) Order 1998; Excise 
Duties (Exemption) Order 1997; and Sales Tax (Exemption) Order 1980 (viewed at: http://www.pytheas.net/docs/malaysia/CustomsAct1967.pdf ).  WT/TPR/S/292 • Malaysia 
 
- 46 - 
 
  the revenue forgone from import duty and sales tax relief was US$1.3 billion in 2012 (equivalent 
to 13% of total tariff revenue) compared with US$1.5 billion (15.7% of total tariff revenue) in 2011.  
3.2.2.6  Tariff preferences  
3.31.  Following unilateral MFN tariff reductions (section 3.2.2.1), and despite efforts to expand 
bilateral and regional free-trade agreements during the review period, the gap between Malaysia's simple average applied MFN tariff rate and the average preferential rate on imports from 
preferential or FTA trading partners was reduced (Table 3.2). The simple average rates under 
virtually all preferential arrangements remain lo wer than the simple average MFN rate, although 
the averages vary widely among the a rrangements and among product groups.
23 Similar 
nomenclature-related technical difficulties to those encountered in tariff bindings (section 3.2.2.4) 
affected the Secretariat's appraisal of preferential tariff treatment for imports from China, Japan, 
Korea (Rep. of), Pakistan, New Zealand, and ot her ASEAN countries (HS07); only the ATIGA and 
MAFTA (section 2.4.2) preferences were available in an accurately comparable nomenclature 
(HS12).  
Table 3.2 Summary analysis of the Malaysian preferential tariff, 2013 
(%) 
 
Preferential 
linesa  
(% of all tariff 
lines) 
Duty-free lines 
(% of all tariff 
lines) 
Overall 
average 
WTO  
agriculture 
WTO 
non-agriculture 
Textiles 
Clothing 
Leather, rubber, 
footwear & 
travel goods 
Transport 
equipment 
MFN  64.6 5.6 2.9 6.0 8.9 0.2 11.4 17.6 
ATIGAb 33.9 98.0 0.3 0.3 0.3 0.1 0.0 0.0 0.0 
MAFTAc 34.0 96.0 0.6 1.2 0.5 0.0 0.0 0.4 3.1 
MNZFTAd 34.2 94.1 0.4 0.7 0.4 0.0 0.0 0.1 1.2 
MPCEPAe 25.5 79.5 3.4 0.8 3.8 3.1 0.1 4.7 12.0 
MCFTAf 33.7 90.6 1.3 1.1 1.3 0.2 0.0 5.4 8.7 
MICECAg 26.5 75.7 3.3 1.3 3.6 3.5 0.1 6.8 15.1 
a The number of preferential lines corresponds only to tariff lines that are lower than the 
corresponding MFN applied. 
b  ASEAN Trade in Goods Agreement. 
c  Malaysia-Australia Free Trade Agreement. d  Malaysia-New Zealand Free Trade Agreement.  e  Malaysia-Pakistan Closer Economic Partnership Agreement. f  Malaysia-Chile Free Trade Agreement. g  Malaysia-India Comprehensive Economic Co-operation Agreement (as of September 2013). 
Note:  Calculations are based on national tariff line level (nine-digit); excluding in-quota rates and specific 
rates and including the ad valorem  part of alternate and compound rates. Preferential agreements 
cited are those received from the authorities. MN ZFTA, MPCEPA, MCFTA, and MICECA original data 
were provided in HS07 nomenclature and changed by the Secretariat into HS12 for calculation purposes. 
Source: WTO Secretariat calculations, based on da ta provided by the authorities of Malaysia. 
3.2.3  Import licensing, restrictions, and prohibitions 
3.2.3.1  Licensing  
3.32.  No major changes have been made to Malaysia's import licensing regime, which affects 
about a quarter of Malaysia's tariff lines. Since 2010, 55 tariff lines (e.g. sugar, saccharin, ractopamine, multicolour copy machines, automatic cassette/cartridge loaders) have been 
                                               
23 At the time of the previous TPR of Malaysia the MP CEPA's simple average preferential rate (based on 
HS07) was 6.7% (WTO document WT/TPR/S/225/Rev.1, Table III.2, 15 February 2010).  WT/TPR/S/292 • Malaysia 
 
- 47 - 
 
  removed, and 28 tariff lines (e.g. agricultural products, timber products, tyres, aluminium 
products, CITES items) added to those subject to import licensing requirements. As of March 2013, imports subject to licences were classified depending on the local destination of the merchandise: goods destined to the entire territo ry (8 major product categories including motor 
vehicles, ships derricks and cranes, certain substances, certain medicaments, medicine-making 
machines); goods destined to the territory except for specified free zones (20 product categories including sugar, rice milling machines, unmanufactured tobacco, chemicals, optical disc 
mastering/replicating machines, used tyres/brakes/batteries, tractors, motorcycles, chassis for 
motor vehicles, motorcyclist's helmets, and all goods from Israel); and goods destined to the territory except for specified free zones and certain states (Labuan, Langkawi, and Tioman) (14 product categories including wheat/meslin flours, and iron/steel/aluminium products).
24 
Furthermore, imports of 60 product categories (including live/edible animals/fish/birds, plants, 
pork products, milk, pasta, ice cream, animal feeding, fertilizers of animal origin, paddy rice, coffee, cabbage, natural honey, numerous food products, logs/wood in the rough from all countries 
except Indonesia, wood, plywood, raw hides and sk ins, leather, arms and ammunition, explosives, 
pesticides) were subject to permit or approval and inspection (often depending on the Malaysian State of destination) by different government or non-governmental agencies.
25 According to the 
authorities this approval/permit requirement is to ensure the fulfilment of international 
commitments, as well as for national security, public health and safety, and monitoring purposes. 
3.33.  Automatic licensing is for data collection and monitoring purposes; all automatic licences 
can be obtained online through the national sing le window system (section 3.2.1.1). Most of 
Malaysia's import licensing remains non-automatic and licensing is mainly intended to regulate the 
flow of imports and to promote import-sensitive strategic industries selected for achieving certain socio-economic objectives.
26 To reduce the reliance of domestic industry on imports, heavy 
machinery for the construction sector is granted import approval only if not available locally27; 
from January 2010 to June 2013, 8,424 approvals were granted, while 1,960 applications were rejected. Several government agencies are involved in granting licences.
28  
3.34.  Malaysia submits regular Replies to the Questionnaire on Import Licensing Procedures to the 
WTO Committee on Import Licensing; its latest updating notification was on 7 October 2011.29  
3.2.3.2  Quotas 3.35.  According to its 2011 WTO notification, Malaysia uses non-automatic licensing to ensure the 
orderly importation of round cabbages and un-ro asted coffee beans, and to provide temporary 
protection to local growers of these products.
30 The authorities indicated that import licences for 
                                               
24 Customs (Prohibition of Imports) Order 2012 (P.U. (A) 490), 31 December 2012, notified in WTO 
document G/LIC/N/1/MYS/2, 11 April 2013. 
25 Customs (Prohibition of Imports) Order 2012 (P.U. (A) 490), 31 December 2012, notified in WTO 
document G/LIC/N/1/MYS/2, 11 April 2013. 
26 These items/activities include sugar, wheat flours , unmanufactured tobacco, chemicals, used tyres, 
passenger and commercial vehicles and motorcycles, cert ain iron and steel items, and rice milling machinery 
(sections 4.2 and 4.6). According to Malaysia's WTO notifications since its last TPR, 14 nine-digit HS items (used pneumatic tyres and flat-rolled products of other alloy steel of a width of 600 mm or more of silicon-electrical steel) were added to the items subj ect to non-automatic import licensing requirements for 
public safety and import monitoring purposes (WTO documents G/LIC/N/2/MYS/4, 19 April 2010; 
G/LIC/N/3/MYS/7, 10 October 2011; and G/LIC/N/2/MYS/5, 3 July 2012). 
27 EIU (2012a).  
28 They include: the Ministry of International Tr ade and Industry; the Ministry of Energy, Green 
Technology and Water; the RMCD; the Ministry of Agriculture and Agro-based Industry; the Federal 
Agricultural Marketing Authority (FAMA); the Departme nt of Agriculture; the De partment of Veterinary 
Services; the Pesticides Board of Malaysia; the Fisheries Development Authority of Malaysia, and Department of Fisheries Malaysia; the Drug Control Authority; and the Malaysian Communications and Multimedia Commission. 
29 WTO document G/LIC/N/3/MYS/7, 10 October 2011. 
30 The amount of round cabbages and coffee beans that  may be imported are sp ecified in the import 
licences. Importers are required to apply for a licence for each import. Prior to applying for import licences for 
these products, importers need to secure a quota grante d on monthly basis for cabbages and on a yearly basis 
for coffee beans. Quotas are valid for two years. The quota volume in the case of coffee beans is usually 
determined by the capacity of the proc essing plant while in the case of cabbages it is determined by the ability 
of the applicant to purchase (WTO documents G/LIC/N3/MYS/4, 17 October 2008, and G/LIC/N/3/MYS/7, 
10 October 2011). During the period under review Malaysia's annual green coffee production ranged from 1 million (2010) to 1.45 million (2012) 60 kgs bags (Index Mundi online information. Viewed at: WT/TPR/S/292 • Malaysia 
 
- 48 - 
 
  both products relate to TRQ implementation (secti on 3.2.2.3), and no such quotas were applied on 
coffee beans during the period under review.  
3.36.  The potentially restrictive import licensing system of "approved permits" (AP) governing the 
importation and distribution of foreign-built or assembled cars, trucks, and motorcycles, which 
forms part of the National Automotive Policy (NAP), is to be terminated in 2015 for open APs, 
and 2020 for franchise APs (section 4.6).31 The AP system is allegedly administered in a 
non-transparent manner and operates as a de facto  import quota by restricting the total number of 
imported vehicles in a given year. Under open APs,  the quantity allocated is based on the open AP 
audit performance in the previous year. For franchise APs, allocation is based on the performance of imports and annual imports proposed by APs hold ers. According to the authorities, since 2007 
quotas administered via APs have exceeded the 10% of total industry production from the 
previous year, due to the lack of restrictions on imports from ASEAN countries.  
3.2.3.3  Prohibitions 3.37.  During the period under review, Malaysia prohibited imports of a number of products from 
certain countries on religious, security, health, and environmental health and safety grounds 
(section 3.2.5).
32 In March 2013, imports of 13 major product categories were prohibited, 
including certain animal feed, tyres (new, retreaded), poisonous chemicals and minerals, 
substances under the Montreal Protocol, and logs and wood in the rough from Indonesia.33  
3.2.4  Contingency measures  3.38.  No changes have been made to the Countervailing and Anti-Dumping Duties Act 1993 or the 
Countervailing and Anti-Dumping Duties Regulations 1994 since 2006. During the period under 
review, overall Malaysia's recourse to anti-dumping action dropped markedly. While no case was 
initiated from 2007 to 2011
34, in 2012 Malaysia launched three investigations involving steel wire 
rod (China, Chinese Taipei, Indonesia, Korea (Rep. of), Turkey), biaxially oriented polypropylene 
film (China, Chinese Taipei, Indonesia, Thailand, Viet Nam), and hot-rolled coils (Chinese Taipei).35 
As of end June 2013, anti-dumping measures in th e form of duties were in force on two products, 
i.e. newsprint (Canada, Indonesia, Korea (Rep. of ), Philippines, United States) and polyethylene 
terephthalate (Thailand); all these measures have been in place since 2003 (one since 2005), and 
were extended in 2009 (one in 2011). Malaysia ha s never taken countervailing measures. Since its 
last Trade Policy Review, Malaysia has submitted semi-annual reports on anti-dumping and countervailing actions to the relevant WTO Committees.  
3.39.  The Safeguards Act of 2006 was amended in mid-2012 to fulfil Malaysia's commitments in 
bilateral or regional FTAs, and entered into force on 1 September 2013. The Safeguards Regulations 2007 remain unchanged since the last TPR of Malaysia. Malaysia published the 
Safeguards (Agreement On Trade In Goods Of  The Framework Agreement On Comprehensive 
Economic Co-Operation Between The Association Of Southeast Asian Nations And China (Safeguard Measure)) Regulations 2013, which entered in force on 2 September 2013. Malaysia 
initiated its first ever safeguards investigation relating to imports of hot-rolled coils on 
1 May 2011; the investigation was terminated without further action on 22 August 2011.
36  
                                                                                                                                               
http://www.indexmundi.com/agriculture/?count ry=my&commodity=green-c offee&graph=production ); in 2011 
unroasted coffee beans imports attained 9,644,172 kg. 
31 More information on the Aps system is available in WT/TPR/S/225/Rev.1, 15 February 2010. 
32 Customs (Prohibition of Imports) Order 2012 (P.U. (A) 490), 31 December 2012, notified in WTO 
document G/LIC/N/1/MYS/2, 11 April 2013. 
33 Customs (Prohibition of Imports) Order 2012 (P.U. (A) 490), 31 December 2012, notified in WTO 
document G/LIC/N/1/MYS/2, 11 April 2013. 
34 With 48 cases initiated between 1995 and 2012 (end June), Malaysia was the world's 16th major user 
of anti-dumping measures (WTO online information. Viewed at: 
http://www.wto.org/english/tratop_e/adp_e/AD_InitiationsByRepMem.pdf  [22 February 2013]). 
35 WTO documents G/ADP/N/230/MYS, 26 September 2012; G/ADP/N/237/MYS, 31 January 2013; and 
G/ADP/N/244/MYS, 24 September 2013. 
36 WTO documents G/SG/N/9/MYS/1, 7 September 2011, and G/SG/N/6/MYS/1/Corr.1, 
14 October 2011. WT/TPR/S/292 • Malaysia 
 
- 49 - 
 
  3.2.5  Standards and other technical requirements  
3.2.5.1  Standards, testing, and certification  3.40.  The improvement and development of st andards are among Malaysia's priorities for 
achieving high-income-nation status by 2020.
37 The 2004 National Standards and Strategy Action 
Plan, continues to serve as a guideline to enhance Malaysia's standardization activities until 2020.  
3.41.  During the review period, the institutional setting in this area remained virtually unchanged. 
The Department of Standards Malaysia (Standards Malaysia, DSM) under the Ministry of Science, 
Technology and Innovation functions as Malaysia's national standardization and accreditation body. 
SIRIM Berhad, a wholly state-owned company, is the national standards development agency under the provisions of the Standards of Malaysia Act; it is the national organization of standardization and quality and serves as the Government's catalyst for industrial research and 
development. Nevertheless, following the amendment of the Standards of Malaysia Act 1996 
(Act 549) (in force since 15 April 2012), Standards Malaysia is empowered to appoint multiple standards development agencies (SDAS), besides SIRIM Berhad, in order to expedite the 
development of Malaysian Standards (MS). The Malaysian Standards and Accreditation Council is 
the advisory body established under the Act to ad vise the Minister of Science, Technology and 
Innovation on matters relating to standards and accreditation. Malaysia participates in the 
activities of the International Organization for Standardization (ISO) and the International 
Electrotechnical Commission (IEC).
38  
3.2.5.1.1  Malaysian standards 3.42.  Malaysian standards (MS) are voluntary unless referred to in legislation (including specific 
technical regulations). At end 2012 the major product categories of the 6,381 MS (5,444 in 2008) 
in place were chemicals and materials (707), information technology, communications and multimedia (687), power generation, transmission an d distribution of energy (569), food and food 
products (463), and electrical and electronics equipment and accessories (426).
39 At end 
December 2012, 416 or 6.5% (3.2% at end 2008) of all MS were compulsory.40 A number of 
foreign standards and international standards are referred to in Malaysia's technical regulations. 
MSs are implemented in product certification, quality management systems, and environmental 
management systems certification; they are review ed every five years or whenever required to 
keep current with the latest technological developments.41 
3.43.  The Government aims to align Malaysian standards with international standards. As of 
December 2012, 59.8% (58.1% in 2008) of MS were aligned with international standards, and 
57.51% were identical (Table 3.3); the highest levels of alignment were in information and communication technology (ICT), power-generating, and electrical and electronic equipment.
42  
                                               
37 WTO document WT/TPR/M/225/Add.1, 19 March 2010; and EIU (2012a).  
38 Malaysia participates in the Council, Technical Management Board, and various technical committees 
and sub-committees of the ISO, and various technical committees and sub-committees of the IEC. 
39 Standards Malaysia online information, "Malaysian Standards (MS) Status as of Minister approval on 
13 December 2012". Viewed at: http://www.standardsmalaysia.gov.my/document s/10179/90020/Status%20of% 20MS%20as%20of%20Minist
er%20Approval%2013%20December%202013.pdf  [14 March 2013]. 
40 Goods subject to technical regulations include palm oil, certain vegetables and flowers, certain 
chemicals and materials, materials related to building an d civil engineering, iron an d steel, electrotechnical 
engineering, mechanical engineering, information techno logy, petroleum and gas, ro ad vehicles, goods related 
to fire safety and preventi on, and medical devices.  
41 U.S. Department of Commerce/U.S. Commercial Service (2012). 
42 Standards Malaysia online information, "Malaysian Standards (MS) Status as of Minister approval on 
13 December 2012". Viewed at: 
http://www.standardsmalaysia.gov.my/docume nts/10179/90020/Status%20of% 20MS%20as%20of%20Minist
er%20Approval%2013%20December%202013.pdf  [14 March 2013]; and EIU (2012a).  WT/TPR/S/292 • Malaysia 
 
- 50 - 
 
  Table 3.3 Malaysian standards aligned to  international standards, 2008 and 2012 
Description 2008  2012 (to November)  
Total MS  
(A) IDT 
(B) MOD 
(C) Total MS 
developed 
(A) Aligned MS 
IDT 
(B) MOD 
(C) 
Agriculture 571 121 6 191 45 0 
Chemicals and materials 708 331 50 707 241 3 
Consumer interests (especially 
cross-sectoral standards such as product safety and product recall) .. .. .. 1 1 0 
Buildings, construction, and civil 
engineering 263 61 4 357 54 2 
Power generation, transmission, 
and distribution of energy 770 590 28 569 379 42 
Mechanical engineering 294 127 5 339 209 4 
Information technology, 
communications, and multimedia 643 591 3 687 619 0 
Petroleum and gas 205 105 2 239 80 4 
Halal standards 4 0 0 12 0 0 
Plastics and plas tics products 365 180 13 365 186 12 
Packaging and logistics 96 55 0 123 52 0 
Road vehicles 173 88 12 243 138 3 
Fire safety and prevention 86 28 2 90 28 2 
Rubber and rubber products 194 104 19 163 93 6 
Organizational management 71 31 1 10 6 0 
Metallic materials and 
semi-finished products 103 39 12 289 190 12 
Textiles and apparels 255 57 0 309 204 4 
Medical devices and facilities for 
healthcare 166 156 1 368 314 5 
Electrical and electronic equipment 
and accessories 93 28 0 426 358 25 
Tourism, exhibition, and hospitality 
services  6 6 0 13 10 0 
Food, food products, and food 
safety 49 15 2 463 140 15 
Occupational safety and health 149 127 4 220 163 4 
Quality management and quality 
assurance 122 114 2 99 97 0 
Environmental management 58 40 0 98 63 3 
Total  5,444 2,994 166 6,381 3,670 146 
% of alignment to international 
standards (B+C/A) 58.04   59.80   
% identical to international 
standards (B/A) 54.99   57.51   
.. Not available. 
Note: IDT = identical; MOD = modified. Source: Information provided by the Malaysian authorities. 
3.2.5.1.2  Halal certification 
3.44.  Malaysia has been successful in developing halal certification, reflecting the Government's 
aim to make the country a hub for halal food products. In 2011 the authorities introduced the world's first halal pharmaceuticals standards.
43 All meat, processed meat products, poultry, and 
egg products, domestically produced or imported, must receive halal certification from the 
Department of Islamic Development Malaysia (JAKIM) or any foreign halal certification body 
recognized by JAKIM prior to importation and distribution in Malaysia.  
3.45.  The slaughtering of animals (other than swine) and production of animal-based products 
(other than swine) for export to Malaysia must be conducted according to halal requirements. The 
Department of Veterinary Services  (DVS), in collaboration with other relevant agencies, such as 
JAKIM and the Ministry of Health, inspects sl aughterhouses and processing plants overseas 
periodically, to ensure compliance with Malaysia's halal import requirements. Inspection is usually 
                                               
43 EIU (2012a). WT/TPR/S/292 • Malaysia 
 
- 51 - 
 
  once a year or every two years, but depends on the risk involved in the particular country. JAKIM 
recognizes the qualified  Islamic organization in the exporting country/economy for monitoring the 
halal process in the slaughterhouse and issuing halal certificates for products exported to Malaysia. Malaysia has no mutual recognition arrangements with foreign standards-setting bodies on 
standardization and inspection for halal certification. A Malaysian Protocol for Halal Meat and 
Poultry Production was implemented from August 2011. Since then, concerns have been raised about the protocol, on several occasions, by Argentina, Brazil, the United States, and the 
European Union, in the WTO Committee on Technical Barriers to Trade.
44 
3.2.5.1.3  Accreditation and quality management standards 
3.46.  There have been no changes in Malaysia 's system of conformity assessment since its 
previous Review. Standards Malaysia operates as the sole national accreditation body. The DSM 
provides accreditation services to certification bodies, inspection bodies, and testing and 
calibration laboratories. Its accreditation system is claimed to be in accordance with the international standard MS ISO/IEC 17011 to ensure that the accreditation services provided are 
impartial, non-discriminatory, and credible.
45 Accreditation of laboratories is carried out under the 
Laboratory Accreditation Scheme of Malaysia (SAMM).46 To encourage more conformity 
assessment bodies to support Standards Malaysia's accreditation schemes, the Government offers 
tax incentives in the form of tax deductions for th e costs incurred, such as the assessment fee, the 
annual fee, and the fee imposed by Standards Malaysia. The tax deduction is applicable for all programmes operated under its various accreditation schemes.
47 At end 2012, a total of 472 
(405 in 2008) laboratories had been accredited.  
3.47.  SIRIM QAS International Sdn. Bhd, a subsidiary of SIRIM Berhad, is the leading certification, 
inspection, and testing body in Malaysia, and provides marks for a variety of certifications. Permission to use the SIRIM Quality Mark on products or services is given to manufacturers and 
companies whose products and services consistently conform to the relevant MS guidelines.
48 To 
ensure compliance with the requirements of the mark, SIRIM undertakes periodic product testing, makes both regular and unannounced visits to manufacturers, and regularly checks their quality 
controls and procedures.  
3.2.5.1.4  International cooperation  3.48.  Malaysia participates in voluntary mutual recognition arrangements under: the Asia Pacific 
Laboratory Accreditation Cooperation and International Laboratory Accreditation Cooperation 
(APLAC/ILAC) MRA for testing and calibration; an d the Pacific Accreditation Cooperation and the 
International Accreditation Forum Multilateral Recognition Agreement (PAC/IAF MLA) for the quality management system (QMS) and the en vironmental management system (EMS) and 
product certification (PC). It also participates in the ASEAN Electrical and Electronic Equipment 
MRA as well as the ASEAN MRA on Pharmaceutical Inspection, and as a member of PIC/S (Pharmaceutical Inspection Cooperation Scheme). Malaysia has been involved in the development 
of international standards through its participation in bodies such as the ISO and IEC. It has also 
obtained full adherent status in the OECD Mutual  Acceptance of Data (MAD) in March 2013 for its 
Good Laboratory Practice (GLP) Compliance Programme.  
3.2.5.1.5  Transparency 
3.49.  Criteria for adopting standards are determined by the relevant "standard development 
committees". These committees are established on the basis of four main stakeholder categories (producer interest, regulatory authority, user interest, general interest) and report to the 
                                               
44 WTO document G/TBT/GEN/74/Rev.9, 17 Oc tober 2011; and G/TBT/33, 27 February 2013. 
45 Standards Malaysia online information. Viewed at: 
http://www.standardsmalaysia.gov.my/accreditation-overview .  
46 Other Standards Malaysia accreditation schemes are:  the Accreditation of Certification Bodies Scheme 
(The ACB Scheme); Malaysia Inspection Bodies Accr editation Scheme (MIBAS); and the Good Laboratory 
Practice Compliance Programme (GLP CP), which is in line  with the OECD Principles of GLP (Standards Malaysia 
online information. Viewed at: http://www.standardsmalaysia.gov.my/schemes-programmes ). 
47 Standards Malaysia online information. Viewed at: http://www.standardsm alaysia.gov.my/tax-
benefits . 
48 For a full list of SIRIM quality marks see: http://www.sirim-qas.com.my/certlist2.asp ; see also 
U.S. Department of Commerce/U.S. Commercial Service, 2012. WT/TPR/S/292 • Malaysia 
 
- 52 - 
 
  Malaysian National Standards Committee (MyNSC) and Malaysian Electrotechnical Committee 
(MyENC). Standards Malaysia is the secretariat for the committees. The national standardization system uses a consensus process to develop new standards, allowing all stakeholders to provide inputs into the development process.
49 Foreign interests are considered in the adoption of new or 
revised standards through the "public comment" procedures on any draft standards made publicly 
available on the websites of Standards Malaysia and SIRIM Berhad. A list of existing MS can be viewed online (www.msonline.gov.my).  
3.50.  Between 2009 and 2012, Malaysia made 17 notifications under the WTO Agreement on 
Technical Barriers to Trade; the majority were under Article 2.9 of the Agreement (15). In more than half of these cases (9) the submission allowed for a comment period of 60 days or more, while in 7 cases the period was not specified, had lapsed or was stated as non-applicable.
50  
3.2.5.2  Sanitary and ph ytosanitary regulations 
3.51.  The regulatory framework under which SPS measures are implemented has remained 
largely unchanged since Malaysia's previous Review.51 A new Malaysian Quarantine and Inspection 
Services Act (Act 728), passed in August 2011 and effective 1 January 2012, covers the provision 
of integrated services relating to quarantine, inspection, and enforcement at entry points.52 As at 
November 2013, Act 728 had not been notified to the WTO SPS Committee, as it was in the 
process of amendment. 
3.52.  The Ministry of Agriculture and Agro-bas ed Industry (MOA) is responsible for matters 
relating to plants, animals, and fisheries; its Department of Agriculture (DOA), Department of Veterinary Services (DVS), and Department of Fi sheries (DOF) are responsible for matters relating 
to plants, animals and animal products, and fisherie s, respectively. The Ministry of Health (MOH) is 
responsible for food safety matters. The Malaysia n Quarantine and Inspection Services (MAQIS), 
which was created to enforce Act 728 and operates as a one-stop centre, provides the following 
services at entry points: quarantine stations and quarantine premises; certification for import and 
export of plants, animals, carcasses, fish, agricultural produce, soils and microorganism; and inspection of and enforcement relating to food and for matters connected to it. In 2013, MAQIS 
adopted regulations on: registration of impo rters, exporters and agents; quarantine and 
inspection; fees and charges; and permits, licenc es, and certification. The authorities indicated 
that MAQIS was notified to the WTO under the import licensing notification requirements in October 2013; the notification was yet to be issued and circulated. 
3.2.5.2.1  Food standards 
3.53.  During the period under review, several amen dments relating to food additives, heavy metal 
contaminants and microorganism and its toxins were made to the Food Regulations 1985.
53 
Amendments regarding storage temperature of frozen food and a schedule on compoundable 
offences were also made to the Food Hygiene Regulations 2009. According to the authorities, these amendments were based on risk analysis, taking into consideration local situations including 
the national food consumption patterns and international standards such as those set under the 
Codex Alimentarius. Under the Food Hygiene Regulations 2009, it is mandatory for food manufacturing facilities and food premises to implement a food safety assurance system. Malaysia developed and maintains various certification schemes including the Good Manufacturing Practices 
(GMP) Certification Scheme and the Hazard Analysis and Critical Control Points (HACCP) 
Certification Scheme, which facilitate food trad e as HACCP and GMP have become increasingly a 
requirement by importing countries.  So far, no MOUs on food safety and quality have been signed 
with trading partners.  
                                               
49 U.S. Department of Commerce/U .S. Commercial Service (2012). 
50 WTO documents G/TBT/28, 5 February 2010; G/TBT/29, 8 March 2011; G/TBT/31, 2 March 2012; 
and, G/TBT/33, 27 February 2013. 
51 More information on the regulatory framework in this area is available in WTO document 
WT/TPR/M/225/Add.1, 19 March 2010. 
52 The Act was viewed at: http://www.maqis.gov.my/c/document_library/get_file?uuid=0ceba49e-f212-
41b9-882a-66aa06c74b45&groupId=29274 . 
53 More specifically, these amendments included: the re gulation on flavouring substances and its related 
schedule as well as the table on mycological contaminant and maximum permitted proportion of metal 
contaminants, arsenic, lead, tin, mercury, and cadmium in specified foods. The Food Act 1983, its related regulations and amendments, viewed at: http://fsq.moh.gov.my . WT/TPR/S/292 • Malaysia 
 
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  3.2.5.2.2  Biosafety  
3.54.  Malaysia's 2007 Biosafety Act entered into force on 1 December 2009, upon expiry of a 
grace period of two years. This enabled the st akeholders to understand its requirements by, 
inter alia,  carrying out capacity-building activities.54 It requires the National Biosafety Board (NBB) 
to evaluate and approve living modified organisms (LMOs) before release onto the market for food, 
feed, or processing.55 This applies to any genetically modified organisms (GMOs) that may be 
found in corn and soybeans imports. A Genetic Mo dification Advisory Comm ittee (GMAC) provides 
expert advice to the NBB on application. The NBB is to complete applications within 180 days, 
taking into account the decision-making process provided in the domestic legislation, including risk assessment, consultation with relevant Government agencies, mandatory consultation with public and stakeholders, before a product is approved. Information regarding regulatory matters of LMOs 
are publicly available online from Malaysia Biosafety Clearing House.
56 As of November 2013, the 
NBB had approved 11 events for food, feed, and pr ocessing; the authorities indicated that all the 
applications were approved within the stipulated time and several seminars were organized to 
guide industries as well as technology developers on the issue. No genetically modified seed for 
planting is approved for import or for confined tr ials. Biotechnology-related activities benefit from 
tax and non-tax incentives (section 3.4.1.3 and 3.4.2.1.1).  
3.2.5.2.3  Risk analysis  
3.55.  Malaysia acknowledges the importance of risk analysis as the basis for all food safety 
management actions, development of food safety standards, and managing risks associated with 
food hazards.57 Risk analysis is intended to complement the numerous food safety initiatives 
currently being implemented. Malaysia has integrated  the principles and processes of risk analysis 
into its food safety control system, uses it to provide scientific evidence in negotiating access for its food to other countries. Risk analysis is appl ied in the development of food safety standards 
provided under the Food Act 1983 and its regulations, as well as in response to food safety 
emergency/crises that results from emerging hazards or breakdowns in control systems.  
3.56.  During the period under review, Malaysia applied temporary suspensions on imports of 
animal and animal products due to diseases such  as Bovine Spongiform Encephalopathy, Highly 
Pathogenic Avian Influenza, and Foot-and-Mouth Disease reported in the exporting countries concerned.  
3.2.5.2.4  Transparency 
3.57.  Between January 2010 and July 2013, six notifications (two regular notifications and 
four addenda/corrigenda), were submitted under the WTO Agreement on Sanitary and 
Phytosanitary Measures (the SPS Agreement). In the context of the WTO Committee on Sanitary 
and Phytosanitary Measures, between 2011 and 2012 Members raised concerns about Malaysia's 
import restrictions on plant and plant products  (Brazil, Japan) and pork and pork products 
(Canada, EU, United States). In response to comments received from WTO Members, and other 
considerations in the context of the Committee, the Department of Fisheries Malaysia amended the 
detailed conditions on importation of live fish (2011), and the Health Certification Requirement for Import Live Ornamental Fish (2011, 2012) into Malaysia.
58  
                                               
54 The 2007 Biosafety Act forms part of Malaysia's re sponsibilities as a signatory to the Cartagena 
Protocol on Biosafety to the Convention on Biological Diversity of the United Nations (Latifah et al., 2011, 
pp. 12418-12424; and Letchumanan, 2011). 
55 An LMO is a GMO that is still aliv e, such as a fresh fruit or vegetabl e or a seed that has been modified 
using recombinant DNA (University of Colo rado online information. Viewed at: 
http://www.colorado.edu/chemistry/bioi nfo/GeneticallyModifiesOrganisms.htm ; and USDA, 2012a and 2012b). 
56 Viewed at: http://www.biosafety.nre.gov.my/ . 
57 FAO Conference Room Document 6, "Application of Risk Analysis in Food Control: Challenges and 
Benefits Risk Analysis in Malaysia", FAO/WHO Regional Conference on Food Safety for Asia and the Pacific, 
Seremban (Malaysia), 24-27 May 2004. Viewed at: http://www.fao.org/docr ep/MEETING/006/AD699E.HTM 
[14 March 2013]. 
58 WTO documents G/SPS/N/MYS/20/Add.2, 1 June 2011; G/SPS/N/MYS/26/Add.1, 1 June 2011; and 
G/SPS/N/MYS/26/Add.2, 14 August 2012. WT/TPR/S/292 • Malaysia 
 
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  3.2.5.3  Labelling and packaging requirements 
3.58.  Several changes relating to agricultural  and food produce and GMOs/LMOs were made in 
this area during the review period. Several amen dments were made to the Food Regulations 1985 
related to labelling and packaging. These amendments involved: the labelling of food and food 
ingredients obtained through modern biotechnology; the labelling of food which may cause 
hypersensitivity (inclusion of definition for "sugars", inclusion of Nutrient Reference Value (NRV) for "choline"); prohibition of feeding bottles containing Bisphenol A; and regulations on ceramic 
ware. The August 2008 Grading, Packaging and Labelling of Agricultural Produce Regulations, 
effective 1 January 2011 are intended to improve the quality of agricultural produce; they cover imports and exports at the wholesale and retail leve l. They are expected to enhance fair practices 
through: the use of standardized international benchmarks; the dissemination of information 
between traders; the facilitation of traceability of fresh produce along the supply chain; the 
prevention of discrimination between WTO Members when identical or similar conditions prevail; the reduction of restrictions to international trade.   
3.59.  MOH regulations containing mandatory labelling requirements (including the origin of the 
modified gene)
59 for food and food ingredients obtained through modern biotechnology 
(GMOs/LMOs) were issued on 8 July 2010 through amendments to the Food Regulations under the 
Food Act 1983. A two-year grace period was given (until 8 July 2012) before enforcement but the 
grace period was extended until 8 July 2014, on request from the industries. This extension period was given to provide sufficient time for industries to comply with the regulations.  Only those 
events that have been approved by the National  Biosafety Board, Ministry of Natural Resources 
and Environment (NRE) are permitted. Guidelines on Labelling of Foods and Food Ingredients 
obtained through Modern Biotechnology, which outlined the labelling requirements, threshold level, and list of foods exempted from labelling, are available from the MOH.
60 The labelling requirement 
will not apply to meat reared  on feed containing GMOs.  
3.2.6  Government procurement 3.60.  Government procurement remains a vital aspect of Malaysia's financial management, as 
public expenditure consumes a considerable am ount of allocations. Between 2009 and 2011, the 
size of the government procurement market, as per Department of Statistics (DOS) Malaysia data and in terms of government final consumption expenditure (including emoluments), rose from RM 93 billion to about RM 115 billion, while its share to GDP remained at 13%.
61 On the other 
hand, according to the Treasury, procurement expe nditure by the public sector (federal, state, 
local, statutory bodies level) rose from RM 97.7 billion (2009) to almost RM 99 billion (2012); federal government expenditure for supplies, serv ices, and development continued to account for 
the largest part (82.9% in 2012) of total procurement in Malaysia.
62 These estimates do not 
include procurement of goods, services, and works by government-linked companies (see below, section 3.4.3). 
3.61.  During the period under review government procurement continued to be used as a tool for 
achieving socioeconomic and development objectives aimed, inter alia,  at encouraging greater 
participation of the bumiputera  (native Malays) in the economy, transfer of technology to local 
industries, reducing the outflow of foreign exchange, creating opportunities for local 
service-oriented companies, and enhancing export capabilities. The Government is also committed 
to venture into Government green procurement (G GP) as one of the mechanisms to minimize the 
impact on the environment, but there is no such  policy, regulation, or legal framework so far.
63 In 
line with good governance practices, government  procurement should be conducted in compliance 
with the principles of public accountability, transparent, best value for money, open and fair 
                                               
59 It seems that the rationale for the origin requiremen t is to ensure imported pr oducts also comply with 
Halal standards (section 3.2.5.1.2) (USDA, 2012a). 
60 Viewed at: http://fsq.moh.gov.my . 
61 According to a 2012 study, government procuremen t expenditure exceeds 25% of GDP. Government 
final consumption expenditure  consists of expenditure, including im puted expenditure, incurred by general 
government on both individual consumption goods and services and collective consumption services 
(Department of Statistics, 2012a; and Adham and Siwar, 2012a). 
62 Malaysian authorities' estimates, based on Ministry of Finance (2011 and 2012), Annex tables 4.4, 
4.6, 4.10, 4.11, and 4.12. 
63 Adham and Siwar (2012b). WT/TPR/S/292 • Malaysia 
 
- 55 - 
 
  competition, and fair dealing.64 Efforts to reduce corrupt practices in government procurement 
have been undertaken since February 2009 and December 2010.65 On 18 July 2012, Malaysia 
became an observer to the WTO Government Proc urement Agreement; the authorities are of the 
view that Malaysia has yet to attain the level of economic development that would enable it to 
benefit from this Agreement prior to becoming a pa rty. In the meantime as an observer, Malaysia 
expects to acquire a better understanding of the WTO GPA text and learn from the experience of 
other observers and signatories.  
3.62.  The Financial Procedure Act 1957, remains Malaysia's main legal instrument for financial 
matters including government procurement. The Ministry of Finance has main responsibility for government procurement. Any individual, company and corporate body intending to participate in government procurement of supplies and services must register with the Ministry of Finance 
Malaysia, and for works, under the single contractor registration (SSPK) scheme as from 
15 October 2012 they must register with the Construction Industry Development Board Malaysia (CIDB) an agency under the Ministry of Works Malaysia that coordinates all contractors registration 
under CIDB and Pusat Khidmat Kontraktor (PKK).
66 Sales to the Government require a local agent 
and/or a joint-venture partner, usually a bumiputera.  
3.63.  Supplies, goods, services, and works tender s below specified thresholds may be considered 
by the procurement boards in each federal government ministry; the thresholds for procurement 
boards are RM 50 million for supplies, goods, and services tenders (previously RM 30 million) and 
RM 100 million for works (such as construction or engineering services) (RM 50 million).67 Tenders 
in excess of these values must be referred to the Ministry of Finance, which has the main 
responsibility for government procurement, for final decision.  
3.64.  Open tendering is mandatory for procurement of supplies, services, and works above 
RM 500,000.68 Ministries and agencies are allowed to purchase supplies and services up to 
RM 50,000 directly from any known suppliers of goods or services deemed to be consistently 
supplying goods or services at acceptable quality and reasonable price. Suppliers do not need to be registered in relation to such purchases. The authorities indicated that open competition 
involving quotations by a minimum of five suppliers applies to procurement values within the 
range of RM 50,000 to RM 500,000. Some of the largest infrastructure and other projects appear to be sole-sourced through closed negotiations rather than open tenders
69; the authorities 
indicated that a negotiated tender or single-sou rce contract is an exception to the Government 
Procurement Regulations subject to Ministry of  Finance approval, based on strict criteria, 
i.e. security, uniformity, urgency and sole-sourcing. Due to Malaysia's decentralized public procurement system, no data on annual purchase s by procurement method and origin (domestic, 
foreign) since 2010 were available from the authorities. 
                                               
64 Under the Tenth Malaysia Plan 2011-2015, the Government is dedicated to a number of initiatives: (i) 
to implement value management-analysis and life-cycle cost  evaluation for procurement of projects costing RM 
50 million (US$14.2 million) and more to optimize costs without compromising performance; (ii) to procure centrally common items such as offi ce supplies, information communications technology (ICT), and selected 
services, to achieve savings across Government; (iii ) to strengthen common procurement standards and 
policies; and (iv) to expedite the procurement proc esses in accordance with the procurement standards, by 
giving autonomy to the ministries and gove rnment agencies (Adham and Siwar, 2012b). 
65 A four-point approach to reducing corruption in government procurement has involved: increasing the 
number and decreasing the size of government procuremen t contracts subject to open tenders; introducing the 
Transparency International "Integrity Pact" concept to be signed by all vendors th at they understand bidding 
rules and anti-corruption laws prior to engaging in contract negotiations; issuing rules against Ministerial "referral letters" recommending specific contractors fo r government contra cts; and fully implementing the new 
Whistleblower Act (U.S. Department of Commerce/U.S. Commercial Service, 2012; The 2013 Budget Speech . 
Viewed at: http://www.pmo.gov.my/dokumenattache d/bajet2013/SPEECH_BUDGET_2013_28092012_E.pdf  
[5 March 2013]; Adham and Siwar, 2012b; Treasury Instruction Letter, 28 February 2009; and Treasury 
Circular Letter (TCL) 10/2010, 16 December 2010. 
66 Adham and Siwar (2012b); and Treasury Circular Letter 6/2012. 
67 While the Ministry of Finance is responsible for the formulation of ru les and procedures on 
government procurement at th e central level, in practice, the Minist ry has delegated powers to respective 
agencies to do their own procurement with a view to enhancing transparency and improving delivery of 
services. Each Ministry has its own procurement boar d, which has the authority to approve supplies and 
services up to the stated thresholds. 
68 Two methods of tendering (i.e. open and restricted ) are used in Malaysia's government pr ocurement. 
All open tenders are advertised in local newspapers. Rest ricted tenders are used to address specific problems, 
such as security, or due to a limite d number of registered companies. 
69 U.S. Department of Commerce/U.S. Commercial Service (2012). WT/TPR/S/292 • Malaysia 
 
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  3.65.  Generally, international tenders are invited only when domestic goods and services are not 
available.70 In domestic tenders, preferences are provided for bumiputera suppliers and other 
domestic suppliers. The margin of preference for bumiputera  supplies remains unchanged. For 
supplies and services contracts between RM 100,000 and RM 15 million, bumiputera  suppliers 
receive a margin of preference between 2.5% and 10%; the margin is inversely proportional to 
value. Furthermore, preferential treatment is given to bumiputera  manufacturers for locally 
produced goods; the margin is up to 10% for contracts valued below RM 10 million and up to 3% 
for contracts valued above RM 10 million. No preferences are provided for purchases exceeding 
RM 15 million. Procurement policies for government-linked companies (GLCs, section 3.4.3) are similar to those of ministries and other government bodies; GLCs are encouraged to procure from local sources with a view to supporting local and national economic development.
71 Nevertheless, 
GLCs procurement practices are governed by their respective act and they are under the purview 
of their respective board of directors. Thus, GLCs are not governed by the public sector's government procurement rules and regulations.   
3.66.  Malaysia's countertrade policy, Policy and Guideline on Offset Programmes in Government 
Procurement, was revised in 2010 to cover non-defence procurement, and published on 18 March 2011.
72 The policy is aimed at enhancing the country's industrial, technological, and 
overall economic capability by further increasing national competitiveness and supporting its 
high-income-society agenda. The policy is applicable to all government procurement of supplies, services, and works worth more than RM 50 million.  In achieving its goal, the offset instruments 
are leveraged by the government to further support the national aspiration to develop Malaysia as 
a sustainable high-end industrial and technolo gical base. Based on the policy, the offset 
programmes are to be aligned with Malaysia's macroeconomic framework plans such as Vision 2020, the Five-Year Development Plans, Industrial Master Plan, the New Economic Model, 
the National Policy on Science, Technology and Innovation, and other related government policies 
and documents. Malaysia is currently implementing defence and non-defence offset programmes in the aerospace, rail, automotive, and energy sectors. Based on the 100% offset obligations, 
Malaysia currently is handling more than RM 20 billion worth of offset credit generated from 
various offset programmes. 
3.67.  The Government continues to implement its ePerolehan (eP) electronic procurement system 
comprising seven modules
73: supplier registration, central contract, direct purchase, quotation, 
tender, e-Bidding, and ministerial contract. Suppliers can use ePerolehan to electronically receive, 
manage and process orders and payments from government agencies. More than 100,000 suppliers were registered with ePerolehan at end 2011, though only about 
29,000 were transacting at that time. In the fi rst four months of 2012, government agencies 
fulfilled nearly 418,114 acquisitions through the system. All of the 2,600 procurement centres of 
the various government agencies had (at least partially) implemented the system. The system has 
cut the procurement process from about six months to 20-30 days. The enhancement of the 
e-Bidding Module in the eP systems that adopted the concept of a real-time reverse auction also 
leads to greater cost saving, faster procurement processing, and faster payment.
74 In 2012, the 
Government estimated savings of up to 15% from the total procurement deals through e-bidding, 
but generated RM 26 million (US$8.8 million) or 17% of savings. These savings derived from 
reductions in prices of goods, processing costs,  and better inventory mana gement. In 2012, the eP 
reached RM 15.485 billion (US$5.3 billion) in tran saction values (above the original target of 
RM 15 billion). In 2012, there were 111,324 (66,595 in 2000) registered suppliers.  
3.68.  Progress has been made in improving transparency in government procurement in line with 
relevant Asia Pacific Economic Cooperation (APEC standards) but efforts to increase transparency 
                                               
70 When considering bids on major items, there appears to be a gove rnment preference for companies 
with a local presence. The Multimedia Development Corporation (MDC) has publicly announced that bids from firms investing in the Multimedia Su per Corridor will receive priority consideration when the government 
awards major contracts associated with developm ent of the corridor (i.e. flagship applications) 
(U.S. Department of Commerce/U.S. Commercial Service, 2012; EIU, 2012a; and USTR, 2012a). 
71 The "Red Book", published in April 2006, contains procurement guidelines and best practices. GLCs 
are also required to follow "procure ment best practices", including cost minimization, disclosure, building 
long-term relationships with suppliers, and helping to develop local suppliers. 
72 Previously, the countert rade/offset requirements were applied only to defence/security-related 
procurement. 
73 Viewed at: http://home.eperolehan.gov.my . 
74 Adham and Siwar (2012b). WT/TPR/S/292 • Malaysia 
 
- 57 - 
 
  and accountability could intensify as procurement reform is an important goal.75 Open tenders 
must be advertised in local dailies, websites of procuring agencies, and online. In April 2010, the government launched the MyProcurement portal, a central government procurement information centre replacing the MyGovernment portal.
76 MyProcurement portal information centre is now the 
main platform allowing public access to information related to the government procurement 
regime including rules and regulations, tender advertisements, and results of recent tenders of each Ministry, while the eP portal is the gateway to electronic procurement. By 2012, more than 
5,000 contracts were listed on the MyProcurement portal, citing information on advertised and 
awarded tenders (including dates), values of th e contracts, and winners of the tenders. The 
authorities indicated that data on the share of contracts (number, value) dealt with under the 
MyProcurement portal since 2010 are publicly available; nevertheless, access to this site was not 
available during the drafting of this report . In 2009, the Prime Minister established the 
Performance Management and Delivery Unit (PEMANDU) to, inter alia,  address concerns about 
transparency and competitive bidding in government procurement.
77  
3.69.  At the international level, Malaysia is involved in discussing government procurement 
issues, particularly in terms of improving pr ocurement processes and initiatives to improve 
transparency and integrity. Malaysia is, inter alia,  a member of the Government Procurement 
Experts Group (GPEG) under the Asia Pacific Economic Cooperation (APEC), and the Procurement 
Working Group under the United Nations Commission on International Trade Law (UNICITRAL). 
3.2.7  State trading 3.70.  According to the authorities, Malaysia's only state-trading enterprise, within the meaning of 
Article XVII:4(a) of GATT 1994, remains Padiberas Nasional Berhad (BERNAS). BERNAS, a private 
entity, has the sole right to import rice, and in March 2011 its monopoly was extended until 
10 January 2021
78; it also performs social obligations on behalf of the Government, such as 
maintaining a rice stockpile, purchasing paddy from farmers, and acting as a buyer of last resort 
for paddy farmers (section 4.2.5).79 According to the Department of Statistics of Malaysia, in 2012 
BERNAS's rice imports (HS10.06) of more than one million tonnes totalled US$605.8 million and 
originated mainly in Viet Nam (69.2% of the value), Thailand (12.5%), and Pakistan (11.5%). 
Malaysia's WTO notifications on BERNAS and its trading activities were submitted in August 1995 (1 notification), July 2010 (9 notifications), and September 2013; the latest notified statistical information dates back to 2012.
80  
3.3  Measures Directly Affecting Exports 
3.3.1  Procedures  3.71.  There have been no major changes to export procedures in Malaysia since 2010. Export 
declarations can be made by the owner, exporter , consignor or an agent authorized by the owner 
or exporter and approved by Customs. All goods for export must be declared on Customs Form 
No. 2. Documentation and other procedures are electronic. Since November 2011, Malaysia has 
operated self-certification of certificates of origin (COOs) on a pilot-project basis, as a means to 
further reduce cost and time for utilizing preferential tariffs under certain FTAs (selected ASEAN states, Australia, New Zealand) (section 3.2.2.6). MITI undertakes continuous outreach in this area, in particular the Pocket Talk, which provides a platform for government-to-business 
engagement to encourage companies to use trade preferences, provide information on the various 
                                               
75 Adham and Siwar (2012b). 
76 Viewed at: http://myprocurement.treasury.gov.my ; and U.S. Department of Commerce/U.S. 
Commercial Service (2012). 
77 Viewed at: http://www.pemandu.gov.my/ . 
78 The Borneo Post,  "Bernas rice import monopoly extended by more 10 years", 7 May 2012. Viewed at: 
http://www.theborneopost.com/2012/05/07/bernas-rice-import-monopoly-extended-by-more-10-
years/#ixzz2LuWyNZjc  [25 February 2013]. 
79 More information about BERNAS commercial and non- commercial activities is  also available in WTO 
document WT/TPR/M/225/Add.1, 19 March 2010. 
80 WTO documents G/STR/N/1/MYS, 15 August  1995; G/STR/N/2/MYS, G/STR/N/3/MYS, 
G/STR/N/4/MYS, G/STR/N/5/MYS, G/ STR/N/6/MYS, G/STR/N/ 7/MYS, G/STR/N/8/MYS,  G/STR/N/9/MYS, and 
G/STR/N/10/MYS, 7 July 2010; and G/STR/N/11/ MYS, G/STR/N/12/MYS, G/STR/N/13/MYS, and 
G/STR/N/14/MYS, 2 September 2013. WT/TPR/S/292 • Malaysia 
 
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  ROOs, and hand-hold and walk through the processes and procedures for COO application.81 
According to the World Bank/IFC, in 2012 exporting a standard container of goods required 5 documents, took 11 days, and cost US$435.
82 
3.72.  Export proceeds must be repatriated to Malaysia in full as per the sales contract, within 
six months from the date of export. They may be  received in foreign currencies (except for the 
currency of Israel) or in ringgit from an external account, and may be retained in foreign currency accounts with banks in Malaysia or at overseas branches of Malaysian-owned banks.
83 Permission 
(ex ante ) is required for residents to retain export proceeds in foreign currency accounts in 
international Islamic banks or offshore banks.  
3.3.2  Export prohibitions, restrictions, and licensing  3.73.  The Customs (Prohibition of Exports) Order 2012 (effective March 2013) sets out current 
export prohibitions, restrictions, and licensing requirements.
84 A s  f r o m  2 0 1 1 ,  e x p o r t s  o f  c e r t a i n  
subsidized essential items subject to export permit or approval have been prohibited (below and section 3.4.4.2). As of March 2013, exports of two product categories (poisonous 
chemicals/minerals, natural sands) are prohibited. Exports of 25 product categories (including 
rubber budwood/seeds for sowing or planting, palm living tissues/fruits/seeds/pollens/oil/fats, pineapple, sugar, minerals/ores/sands, bricks , cement, chemicals, naphtha, several wood 
products, and all goods to Israel) are subject to ex port licensing requirements with licences issued 
by several public agencies (MITI, Ministry of Pl antation Industries and Commodities, Ministry of 
Natural Resources and Environment, Ministry of Heal th) or public sector agencies (Malaysian Palm 
Oil Board, Malaysian Pineapples Industries Board, Malaysian Timber Industry Board). Exports of 
39 product categories (including live/dead animals/fish/plants, raw hides and skin, wool, leather, 
milk and milk-based products, yeast, meat prod ucts, pasta, ice cream, soups, animal feeding 
preparations, fertilizers of animal origin, paddy ri ce, rice flour, vegetables, coconuts, coffee, sugar 
cane, wheat flour, toxic wastes, pesticides, diesel fuel, petrol, liquefied petroleum gas, rubber and 
rubber products and gloves) are subject to permit or approval and inspection by different government agencies.
85  
3.74.  The Strategic Trade Act 2010 (STA), which was passed to meet Malaysia's obligations in 
relation to the United Nations Security Council Resolution 1540, provides for control over the export, transhipment, transit, and brokering of  strategic items, including arms and related 
materials, and other activities that may facilita te the design, development, and production of 
weapons of mass destruction (WMD) and their delivery systems.
86  
3.3.3  Export duties and taxes 3.75.  Export duties mainly of 5%, 10%, and 15% (f.o.b. basis) affect 482 nine-digit level items 
(2013) relating to the principal commodities out of a total of 9,425 or 9,417 tariff lines (515 out of 
10,389 tariff lines in 2009); one item is subject to ad valorem  duty of 20% (palm nuts and 
kernels), and 10 lines (9 in 2009) are subject to specific rates (rubber tree, oil and rubber tree 
seeds, rattans). Products subject to export taxe s include timber, live animals, ash and residues, 
crude petroleum, precious metals, nickel, copper, and ferrous waste and scrap. To help exporters to ship out more palm oil under competitive terms and cut into record stocks of 2.56 million tonnes in 2012,
87 as from 1 January 2013 a new Crude Palm Oil Export Duty 
Structure, based on the prevailing f.o.b price, cut drastically duties from 23%; a zero rate is 
                                               
81 This platform is also a business–to-government engagement and provides opportunity for companies 
to raise concerns on any challenges faced, which MITI will take into consideration as issues to be highlighted and addressed during the review process of the variou s FTAs and RTAs. The Pocket Talks are frequently held 
throughout Malaysia and open to partic ipation from any interested companies. 
82 World Bank (2013b). 
83 EIU (2012a). 
84 Customs (Prohibition of Exports) Order 2012 (P.U. (A) 491), 31 December 2012. 
85 Wheat flour and certain fuels are also subjec t to price controls and government subsidies 
(section 3.4.2.2 and 3.4.4.2). 
86 PricewaterhouseCooper online information. Viewed at: 
http://www.pwccustoms.com/home/eng/wms_my.html . 
87 The Malaysian Insider , "Malaysia sets January crude palm oil export tax at zero per cent", 
17 December 2012. Viewed at: http://www.themalaysianinsider.com/business/article/malaysia-sets-january-
crude-palm-oil-export-tax-at-zero-per-cent/ .  WT/TPR/S/292 • Malaysia 
 
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  applied when the price is below RM 2,250/tonne, and 9 rates ranging from 4.5% 
(RM 2,250-2,400 per tonne) to 8.5% (above RM 3,450 /tonne) increase by 0.5 percentage points in line with RM 150 per tonne price bands. Processed palm oil, such as neutralized, bleached, and deodorized palm olein, has been fully exempt si nce 2001. According to the authorities, the main 
objective of these taxes is to promote the use of locally produced commodities in domestic 
downstream industries as well as to conserve the environment; export taxes on timber allow them to better manage sustainable development of the Malaysian forest. However, such taxes tend to 
increase the domestic supply of the products co ncerned, and as a consequence, their domestic 
prices tend to be lower than would otherwise be the case. Thus, export taxes assist domestic downstream processing. In 2012 (the latest year fo r which data were made available), Malaysia's 
revenue from export duties amounted to RM 1.968 billion, down from RM 2.296 billion in 2007.  
3.3.4  Duty and tax concessions 
3.76.  There have been no changes to Malaysia 's customs duty and sales tax drawback schemes 
during the review period. Raw materials and components used for manufacture of goods for export 
are exempt from customs duties (section 3.2.2. 5), and the drawback scheme provides refunds. 
The formula for the calculation of drawbacks varies from product to product and depends on the type of industries.
88 No data on the amounts refunded or the value of exports (by product 
category) that benefited from drawback were available from the authorities.  
3.3.5  Export subsidies 3.77.  According to the authorities, Malaysia grants  no direct export subsidies or tax concessions to 
exporters, and incentives (for example, the tax incentive of double deduction for export 
promotion) are given to encourage companies to seek new export markets (section 3.3.8).
89 
3.78.  Support is available in the form of statut ory income tax exemption, based on the value of 
increased exports. A manufacturing company or a company engaged in the production of fresh and 
dried fruits, fresh and dried flowers, ornamental plants, and ornamental fish may benefit from a 
tax exemption on its statutory income equivalent to 10% of the value of its increased exports.90 In 
manufacturing, companies are also eligible for tax exemption on statutory income, equivalent to 
10% or 15% of the value of increased exports, pr ovided that the goods exported attain at least 
30% or 50% value-added, respectively. Under the National Automotive Policy (NAP) (section 4.6), for the period 2010-14 companies in the automotive industry qualify for tax exemptions on statutory income equivalent to 30% or 50% of the value of increased exports, provided that the 
goods exported attain at least 30% or 50% value-added respectively. To further encourage the 
export of Malaysian goods, locally owned manufacturing companies with Malaysian equity of at least 60% are eligible for tax exemption on statutory income equivalent to 30% of the value of 
increased exports, provided that the company achiev es a significant increase in exports; this rate 
is raised to 50% in case the company succeeds in penetrating new markets, and to full tax exemption if it achieves the highest increase in export in its category. No information on the main 
beneficiaries of each of these incentives or es timates of forgone tax revenue relating to their 
implementation since 2010 was available from the authorities.  
3.79.  Exemption of statutory income tax equivalent to 50% of the value of increased export is 
given to companies in selected services sectors, i.e. legal, accounting, architecture, marketing, 
business consultancy, construction manageme nt, building management, office services, 
healthcare, education, plantation, management, publishing, information and communication technology, engineering, printing, and local franchise.
91 
                                               
88 The authorities indicated that for "straight forward cases" (one input to one output/ratio 1:1), the 
formula is: quantity of finished products exported divide d by the quantity of imported raw materials multiplied 
by the duties/taxes paid. In the case of "many inputs (r aw materials) to one output (finished products)", the 
formula is adding all individual calculations for "straight forward cases" for each input used to obtain the entire 
product. 
89 WTO document WT/TPR/M/225/Add.1, 19 March 2010. 
90 MIDA online information, "Inv est in Malaysia". Viewed at: 
http://www.mida.gov.my/env3/index. php?page=manufacturing-sector-2  and 
http://www.mida.gov.my/env3/inde x.php?page=agricultural-sector . 
91 MATRADE online information. Viewed at:  http://www.matrade.gov.my/en/malaysian-
exporters/services-for-exporters/exporters-development/exports-assistance/tax-relief/498-services-sectors .  WT/TPR/S/292 • Malaysia 
 
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  3.3.6  Free zones and other measures 
3.80.  Malaysia has 18 free industrial zones (FIZs)92, only for manufacturing activities, and 17 free 
commercial zones (FCZs)93; these were established to facilitate operations of export-oriented 
companies. No federal or main coordinating body oversees the development of the FIZs. To qualify 
for location in a FIZ, a company must export at least 80% of its output; its raw 
materials/components are mainly imported, even though the Government encourages the use of local raw materials/components. If a FIZ company ha s obtained approval from MITI to reduce its 
export performance requirement to 60%, it may also apply to the Customs to be allowed to export 
60% instead of 80% of its output. Effective 1 January 2011, FIZ companies benefit from import duty exemptions if they achieve 40% of local cont ent value; when the local content value does not 
reach 40%, consideration may be given if the FIZ/LMW companies can prove that the 
non-originating raw material to the end products produced had undergone substantive 
transformation process through a set mechanism.
94 Any goods, from overseas or within Malaysia, 
and services of any description, except those prohib ited by law, may be brought into, produced or 
provided in the zones without payment of any tariffs , excises, sales or service taxes. Domestic and 
foreign enterprises located in the zones are eligible for tax exemptions on income from promoted activities (section 3.4.1.3).
95 Malaysia also allows exporters to a licensed manufacturing 
warehouse (LMW), which offers the same benefits as operating within a FIZ while offering greater 
freedom of location. As of September 2013 2,110 companies were operating in LMWs, 20 in FIZs, and 15 in FCZs. No data indicating the activities of firms established in FIZs/FCZs/LMWs, the jobs created within the zones, the forgone tax revenue  due to the FIZs/FCZs/LMWs incentives, or the 
value of exports of and imports from these zone s as a percentage of total exports and imports 
were available from the authorities.  
3.3.7  Export finance, insurance, and guarantees 
3.81.  Export finance schemes (facilities) are made available via Malaysian commercial and/or 
developmental financial institutions (FIs). Export-Import Bank of Malaysia Berhad a developmental FIs wholly owned by Ministry of Finance Inc. (section 3.4.2) promotes the development of 
cross-border transactions through provision of loan/financing facilities (at commercial rates) and 
insurance coverage to Malaysian businesses. The rates fixed to any lending are subject to credit assessment and mainly charged at cost of fund plus  an added spread. The range of spread reflects 
the bank's assumed risk. Exim Bank also provides commercial banks with coverage for losses 
against loans to exporters and suppliers. It also continues to provide various schemes including 
the Export Credit Refinancing (ECR) Scheme, and offers insurance against non-payment by buyers 
arising from commercial and political risks. The Bank's total assets were RM 7.3 billion on 
31 December 2012, a 16% growth over the previous  year. Net loans and financing grew by 62% 
with RM 3.2 billion compared to RM 1.9 billion in 2011. Total disbursement more than doubled, from RM 1.2 billion to a total of RM3.1 billion. Under Malaysia's Palm Oil Credit and Payments 
Arrangement (POCPA) scheme for palm oil and its products, government to government MOUs and 
central bank to central bank agreements set out the following terms: long-term contract between supplier and buyer, repayment period up to two years, and interest based on three-month LIBOR  
determined on a quarterly basis.  
3.3.8  Export promotion 
3.82.  The Malaysian External Trade Development Corporation (MATRADE), an agency under the 
MITI, continues to focus on facilitating export promotion activities of the local business sector 
through international trade fairs, trade mi ssions, specialized marketing missions, and 
                                               
92 These are located in Penang (2), Malacca (5), Selangor (4), Perak (2), Johor (4), and Sarawak (1). 
See MIDA online information, "Invest in Malaysia". Viewed at: http://www.mida.gov.my/env3/in dex.php?page=industrial-land ; and EIU (2012a). 
93 FCZs are normally located near the country's ports due to the nature of the activities, which can 
include bulk breaking, repackaging of products that ar e imported or sourced from companies in the FIZs. They 
are in Northport, Southport, Westport, Butterworth, Baya n Lepas, Kuala Lumpur Inte rnational Airport, Rantau 
Panjang, Pengkalan Kubor, Johor Port, Tanjung Pelepas,  Stulang Laut, Plentong, Bu kit Kayu Hitam, Kapar, 
Seberang Perai, Penang, and Pulau Layang-Layang (MIDA on line information, "Invest in Malaysia". Viewed at: 
http://www.mida.gov.my/env3/in dex.php?page=industrial-land ; and Chai and Im, 2009). 
94 MIDA online information, "Inv est in Malaysia". Viewed at: 
http://www.mida.gov.my/env3/in dex.php?page=industrial-land . 
95 Viewed at: www.mida.gov.my , Promoted Activities and Products.  WT/TPR/S/292 • Malaysia 
 
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  business-matching programmes.96 A Market Development Grant (MDG) scheme has provided up to 
a maximum of RM 100,000 per company per year in the form of reimbursable grants, subject to yearly review, and the availability of funding a ssists small and medium-sized enterprises (SMEs), 
cooperatives, and trade & industry associations/chambers of commerce in undertaking export 
promotion activities. Companies with government (federal or state government) equity and 
government-linked companies (GLCs) (section 3.4.3) are excluded from these benefits.
97 However, 
under the 10th Malaysian Plan (2011-2015), the maximum grant for each company is now limited 
to RM 300,000. For 2013, the budget allocated for MDG was RM 30 million; the main beneficiaries 
are SMEs involved in export promotion activities for products and services. Tax incentives such as double deduction for promotion of exports, tax exemption, investment tax allowance, capital allowance and special incentives are granted under the Promotion of Investment Act 1986 (PIA), 
and encourage greater export promotion activities overseas.
98 No information on the main 
beneficiaries of these incentives or estimates of forgone tax revenue relating to their implementation was available from the authorities. 
3.4  Measures Affecting Production and Trade 
3.4.1  Taxation and tax incentives 3.83.  Total taxes as a share of GDP remain relatively low (16.2% in 2012, Table 1.1). Malaysia 
relies increasingly on direct taxes for 77.1% (2012) of tax revenues. Although the corporate and 
personal income taxes provide almost half of tax revenue, the petroleum income tax remains a major contributor, accounting for about 22.4% of total tax revenue in 2012 (Table 3.4). Excise duties remain the main, though slightly declining, indirect tax component, followed by the sales 
tax. As a result of, inter alia , import duty reductions (section 3.2.2.1), customs duties contributed 
a lower share to total tax revenues in 2012 than in 2009. The share of export taxes also declined from peak in 2010. 
Table 3.4 Structure of direct and indirect tax revenue, 2009-12  
  2009 2010 2011 2012 
Total tax revenue  
(RM million)  106,504.41  109,515.19  134,884.83  151,643.09  
Total tax revenuea 
(US$ million) 30,217.45  33,999.31  44,080.01  49,094.50  
 (% of total)  
Direct taxes 73.6 72.1 75.8 77.1 
Companies income tax 28.4 33.1 34.8 33.8 
Petroleum income tax 25.6 17.1 20.6 22.4 
Individuals income tax 14.6 16.3 15.0 15.2 
Stamp duties 3.1 3.8 3.7 3.7 
Other 1.9 1.9 1.8 2.1 
Indirect taxes 26.4 27.9 24.2 22.9 
Export duties 1.1 1.7 1.5 1.3 
Import duties 2.0 1.8 1.5 1.5 
Excise duty 9.5 10.7 8.5 8.0 
Sales tax 8.1 7.5 6.4 6.3 
Service tax 3.1 3.6 3.7 3.7 
Other 2.7 2.6 2.6 2.1 
a The annual average exchange rate in Table 1. 1 "Selected macroeconomic indicators, 2009-12" was 
used. 
Source: Information provided by the Malaysian authorities. 
                                               
96 MATRADE online information. Viewed at: http://www.matrade.gov.my/en/for-malaysian-exporters . 
97 MATRADE online information, "Guidelines for Ma rket Development Grant (MDG) 2013". Viewed at: 
http://www.matrade.gov.my/en/malaysia-exporters-section/116-market-development-grant-mdg/2690-
guidelines-for-market-development-grant-mdg-2013 . 
98 MATRADE online information, "E xport Assistance". Viewed at: 
http://www.matrade.gov.my/en/malaysian-exporters/ser vices-for-exporters/exporters-development/exports-
assistance . WT/TPR/S/292 • Malaysia 
 
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  3.4.1.1  Indirect taxes 
3.84.  Since 2010, there has been no major change to the sales tax, which is levied mainly at 5% 
and 10% on both local products and imported items (except those that are to be re-exported).99 
Food preparations (HS 2106.90.490) other th an alcoholic and non-alcoholic compound 
preparations (other than those of heading No. 33.02) used for making beverages are subject to a 
sales tax rate of 20%. Sales tax is RM 0.5862 per litre for petrol, and RM 0.1964 per litre for diesel fuel. 
3.85.  In addition to the sales tax, excise duties  apply to tobacco, beer and liquor, motor vehicles, 
playing cards, and mah-jong tiles. The excise duty on cigarettes was increased in October 2010 
and September 2013. Excise duty rates range as follows: 75%-105% for motorcars; 65%-105% for four-wheel drive vehicles; 10%-30% for motorcycles; 15% plus RM 0.10 per litre to 15% plus 
RM 42.50 per 100% vol per litre for "intoxicating" liquor;
100 10% for playing cards and mah-jong 
tiles; and, 20% plus RM 0.25 per stick for cigare ttes. Excise duty rates are the same for locally 
produced and imported goods. According to the au thorities, in general, excise duty rates are 
higher than import duty for vehicles, cigarettes, and alcoholic beverages, except in some cases 
such as where the import duty is higher than ex cise duty. Individual taxi owners (since 2012) and 
car-rental operators (since 2002) are exempt from excise duties on the purchase of locally 
produced "national cars" while tour operators benefit from a 50% reduction for purchases of locally 
assembled four-wheel-drive cars. The authorities indicated that the measure is partly aimed at reducing the cost of car rentals to tourists and to spur tourism activity (section 4.7.6).  
3.86.  A service tax of 6% (up from 5% before 1 January 2011) applies to the value of certain 
services sold or provided by prescribed establishments throughout Malaysia (except on the islands 
of Labuan, Langkawi and Tioman, and in free zones (section 3.3.6)).
101 Prescribed services include 
most services provided by insurance companie s, telecommunications companies, broadcasting 
entities (paid sa tellite-TV broadcasts as from January 2011), courier-service companies, 
advertising firms, hotels restaurants, private hosp itals/clinics, car-park operators, motor-vehicle 
service/repair centres, professionals (lawyers, en gineers, architects, surveyors, and consultants), 
and credit card service annual fees. 
3.87.  Following 2010 and 2011 plans, in October 2013 it was decided to replace the present 
system of the separate sales and service taxes with a single goods and services (value-added) tax (GST) to be implemented in April 2015(section 1.4.2.1).
102 GST will not be imposed on basic food 
items such as rice, sugar, salt, flour, cooking oil, lentils, herbs and spices, salted fish, cencalok, 
budu and belacan; on piped water supply, and the first 200 units of electricity per month for domestic consumers; and on services provided by the Government, such as the issuance of 
passports, licences, health services, and school educat ion. Transportation services (bus, train, LRT, 
taxi, ferry, boat, highway toll), education and he alth services, are exempted from GST; and the 
sale, purchase and rental of residential properties as well as selected financial services will be 
exempt. Upon implementation of GST, the Gove rnment is to provide various forms of tax 
assistance (e.g. corporate/personal income tax rate reductions) and non-tax assistance to households, individual taxpayers, and businesses to, inter alia , avoid increased prices of goods and 
services; a GST Monitoring Committee is to be established and chaired by the Second Minister of 
Finance with members from government agencies as  well as representatives from industries and 
NGOs.  
                                               
99 The 5% rate applies to fruits, ce rtain foods, and certain building ma terials, alcoholic beverages, and 
cigarettes and other tobacco products. The 10% rate applies on other ty pes of goods. Items exempt from sales 
tax include mobile libraries and clinics; computers; mobile phones; books, newspapers and other reading 
materials; and necessities such as certain essential food items and building materials (Malaysian Investment Development Authority online information, "Costs of Doing Business". Viewed at: http://www.mida.gov.my/env 3/index.php?page=taxation ; and EIU, 2012a). 
100 The term intoxicating liquor refers to any alcoho l or any more than 2% of proof spirit (or 1.14% 
volume per litre), which is fit or intended to be or which can by any means be converted for use as beverage. 
101 Malaysian Investment Development Authority online information, "Costs of Doing Business". Viewed 
at: http://www.mida.gov.my/env3/index.php?page=taxation ; and EIU (2012a). 
102 WTO document WT/TPR/S/225/Rev.1, 15 February 2010; and the 2014 Budget Speech  introducing 
the Supply Bill (2014), "Strengthening economic resilience, accelerating transformation and fulfilling promises", 
25 October 2013. Viewed at: http://www.fmm.org.my/upload/speech.pdf .  WT/TPR/S/292 • Malaysia 
 
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  3.4.1.2  Direct taxes 
3.88.  During the period under review, the corporate tax rate remained unchanged at 25%. The 
corporate tax system is a "single-tier" system, under which the tax on profits of companies is final (i.e. dividends distributed to shareholders are exempt from tax). Companies with paid-up capital of 
up to RM 2.5 million are subject to a corporate income tax of 20% on taxable income up to 
RM 500,000, with the excess taxed at 25%. The tax on income from upstream petroleum activities (petroleum income tax) applies at a rate of 38%. Insurance companies are taxed at 8% on 
investment income generated from life funds,  and 25% on the income of general funds and 
shareholders' funds (including surpluses actually transferred from the life funds to shareholders' 
funds). According to the authorities, Malaysia's corporate tax rate still compares favourably with neighbouring competitors, except for Singapore and Hong Kong, China. Nevertheless, the wide 
range of incentives (section on 3.4.1.3) often reduce the effective tax rate below 25% and make 
the total corporate tax burden comparable to that in neighbouring countries.
103 For residents, the 
personal tax burden compares favourably with that in neighbouring countries. As from the 
assessment year 2010, individuals with taxable income exceeding RM 100,000 a year pay 26% 
(27% in assessment year 2009) on the portion of income exceeding RM 100,000; as from 2013, tax rates on all chargeable annual income band s of up to RM 50,000 have been reduced by 
1 percentage point.  
3.4.1.3  Tax incentives  3.89.  Malaysia's wide-ranging tax incentives remain unchanged since its last TPR. Direct tax 
incentives grant partial or total relief from income tax for a specified period, while indirect tax 
incentives are in the form of exemptions from import duty, sales tax, and excise duty 
(sections 3.2.2.5, 3.3.5, and 3.3.6). The former continue to be implemented mainly through the 
pioneer status and the investment tax allowance (ITA) schemes. Incentives depend on factors 
such as the level of local company ownership, value-added, and level of technology as measured 
by a managerial, technical and supervisory (MTS) index, and/or export performance requirements, 
but also on the level of skill development an d R&D involved (sections 3.3.5 and 3.4.2.1.1).
104  
3.90.  "Pioneer status" is available to any company in any agricultural, manufacturing, hotel, 
tourism, or other industrial or commercial sector that participates in a promoted activity or form of production mentioned in the Promotion of Investment Act 1986.
105 In 2011 and 2012, pioneer 
status was granted to 434 company projects involving investments of RM 32.9 billion. The ITA, an 
alternative to pioneer status for companies participating in a promoted activity or form of 
production, offer higher deductions for certain types of investments in less-developed areas, including Sabah, Sarawak, and the Eastern Corridor of peninsular Malaysia, and to strategic 
projects in other regions.
106 T h e  l a t e s t  l i s t  o f  a c t i v i t i e s  b e n e f i t i n g  f r o m  p i o n e e r  s t a t u s  a n d  I T A  
incentives became effective as of 2 March 2012.107 The Government granted ITAs to 50 projects 
involving investments of RM 11.8 billion in 2011 and 2012. Eligibility criteria for small-scale 
                                               
103 EIU (2012a). 
104 MIDA online information, "Inv est in Malaysia". Viewed at: 
http://www.mida.gov.my/env3/index. php?page=incentive s-for-investment ; PricewaterhouseCoopers (2012); 
and EIU (2012a).  
105 Pioneer status limits tax liability to just 30% of  the company's statutory income—hence, an effective 
tax rate of less than 10%—for five years (though certai n promoted activities qualify for up to 15 years). The 
exemption period starts from the comp any's "production day" (i.e. the day its production level reaches 30% of 
its capacity). In addition, dividends to  shareholders are tax exempt if they  are paid out of tax-exempt income 
(EIU, 2012a; and MIDA online information, "Invest in Malaysia". Viewed at: http://www.mida.gov.my/env3/index. php?page=incentive s-for-investment ).  
106 The ITA grants a tax deduction equivalent to 60% of qualifying capital expenditure incurred within 
five years (up to ten years by exemption) from the approval date. The company may use the allowance to 
offset up to 70% of statutory income in the year of  assessment; it can carry forward any unused balance to 
subsequent years. Dividends paid to shareholders out of tax-exempt income are tax free. Once all planned 
capital expenditures have been incurred, companies gr anted the ITA may give up the incentive before its 
expiry in order to qualify for othe r incentives, such as income abat ement for exports (section 3.3.5) 
(EIU, 2012a; and MIDA online information, "Invest in Malaysia". Viewed at: 
http://www.mida.gov.my/env3/index. php?page=incentive s-for-investment ). 
107 MIDA online information. Viewed at: http://www.mida.gov.my/env3/uploads/images/invest/invest-
pdf/APP1_02032012.pdf .  WT/TPR/S/292 • Malaysia 
 
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  manufacturing companies to qualify for pioneer status or ITA were tightened in 2012.108 Generally, 
neither pioneer status nor ITAs are granted to co mpanies that previously enjoyed these incentives 
for similar products or activities. However, exceptions are made for certain promoted sectors and areas, such as R&D and projects in the less-developed areas of the country. No information on the 
main beneficiaries, the forgone tax revenue or the output, jobs, or exports resulting from the 
operation of the schemes discussed in this paragraph was available from the authorities. 
3.91.  In addition to these schemes, the Government may award more favourable tax relief on a 
case-by-case basis (Customised Incentive Scheme) to strategic projects of national importance, 
e.g. heavy capital investment, and high-tech projects.
109 This relief includes up to 100% 
exemption for 10 to 15 years. No information on the main beneficiaries, the tax expenditure or 
benefits resulting from the operation of this ince ntive was available from the authorities. In 2013, 
activities benefiting from customized tax incentiv e schemes (pioneer, ITA or other) included food 
production and distribution, specialized machinery and equipment, automotive, aviation and aerospace, biotechnology, energy conservation, envi ronmental protection (green incentives), R&D, 
Islamic finance, commodity trading (as from 2011 under the Global Incentive for Trading(GIFT)), 
shipping, regional business operations, and tourism.
110 Applications for part of non-tax incentives 
(section 3.4.2), pioneer status, and ITA are dealt with by the Malaysian Investment Development 
Authority (MIDA); claims for tax incentives such as double deductions, reinvestment allowance, 
and accelerated capital allowance, go to the Inland Revenue Board of Malaysia. Malaysia is to consider preparing tax expenditure reports but this would require MIDA to undertake a prior cost-benefit analysis on a project-by-project basis. 
3.92.  Malaysia notified its pioneer status and investment tax allowance programmes to the WTO 
Committee on Subsidies and Countervailing Measures in 1995, 2009, and 2011.
111 No expiry date 
was indicated for the notified schemes.  
3.4.2  Financial assistance  
3.93.  The Malaysian economy remains one of the most highly subsidized in the region and the 
world. In 2013, almost RM 47 billion were allocated for various types of subsidies, incentives, and 
assistance, including subsidies for petroleum products (53% of the amount), food, health, 
agriculture and fisheries, utilities, tolls, as well as welfare and education.112 In addition to 
wide-ranging tax incentives (sections 3.3.5, 3.3.6 and 3.4.1.3) the Government continues to provide non-tax support in the form of funding assistance (e.g. soft loans) and subsidies to 
support the implementation of different policy objectives; some are directed to majority 
Malaysian-owned firms. No appraisal of the cost-e ffectiveness of this type of support has been 
undertaken so far.   
                                               
108 Qualifying companies are defined as having shar eholder funds of less than RM 500,000 and at least 
60% local equity. They must be active in one of the many promoted sectors. Moreover, their value-added and 
MTS ratios must be at least 25% (since March 2012, previously 15%) and 20% respectively, or they must contribute to rural development (EIU, 2012a; and MIDA on line information, "Invest in Malaysia". Viewed at: 
http://www.mida.gov.my/env3/index. php?page=incentive s-for-investment ). 
109 The projects considered for these incentives ar e those that are technology intensive, capital 
intensive, knowledge- and skills-driven, and capable of generating significant linkages and contributing to development of manufacturing-support services, such as R&D, procurement,  marketing, and distribution. More 
information on these tax incentives is available in EIU (2012a); and PricewaterhouseCoopers (2012). 
110 MIDA online information, "Inv est in Malaysia". Viewed at: 
http://www.mida.gov.my/env3/index. php?page=manufacturing-sector-2  and 
http://www.mida.gov.my/env3/inde x.php?page=agricultural-sector .  
111 WTO document G/SCM/N/220/MYS, 14 October 2011. 
112 Opening Presentation by D.S. Idris Jala, Minist er in Prime Minister's Department. Viewed at: 
http://www.slideshare.net/kzamandarus/malaysian-subsidy-2010-report . The 2014 Budget Speech  introducing 
the Supply Bill (2014), "Strengthening economic resilience, accelerating transformation and fulfilling promises", 
25 October 2013. Viewed at: http://www.fmm.org.my/upload/speech.pdf .  WT/TPR/S/292 • Malaysia 
 
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  3.4.2.1  Funding and other financial measures 
3.4.2.1.1  Technology and R&D 3.94.  Malaysia is banking on technology, either home-grown or imported, to help realize added 
economic value from its natural resources.
113 In addition to tax incentives, the Government 
provides various funds for high-tech companies to draw on; the two most prominent are the 
RM 800 million Science Fund (for scientists and ex perts conducting fundamental research) and the 
RM 1.2 billion Fund for Industry, to help companies to bring technology to the market.114 
Customized training and R&D grants are available for the automotive industry (section 4.6). As 
from July 2012 the Government has introduced the RM 1 billion Domestic Investment Strategic Fund under the Customised Incentive Scheme (section 3.4.1.3) to leverage outsourcing activities and acquisition of technology by at least 60% Malaysian-owned companies in certain priority 
sectors (e.g., aerospace, medical devices, pharma ceuticals, advanced electronics, machinery and 
equipment, renewable energy, and related services).
115 Furthermore, under the Strategic 
Investment Fund (since 2001) and the High Impact Project Fund (since 2006), between 2010 
and 2013 a total of RM 1.86 billion (0.6% of GD P, 2.6% of manufacturing output, 1.1% of 
manufacturing exports) was disbursed in the form of  grants and RM 1.35 billion in the form of soft 
loans. SMEs (section 3.3.5 and 3.4.1.3, and below) undertaking R&D activities receive some 
special funding allocations for seed capital if they are at least 51% Malaysian owned; these 
companies may obtain up to 70% funding for their R&D activities via the Multimedia Super Corridor Malaysia (MSC) Research and Development Grant Scheme. Between 2010 and 2012, Malaysia's Gross Expenditures for R&D (GERD) were estimated to have increased from 
US$2.6 billion (0.64% of GDP) to US$3.3 billion (0.70%).
116 In 2013, the Government planned to 
allocate RM 600 million to five research universities to conduct high-impact research in strategic fields such as nanotechnology, automotives, biotechnology, and aerospace.
117  
3.95.  To boost the production and use of green-technology-based products, the fund for the 2010 
Green Technology Financing Scheme (GTFS) was further increased to RM 2 billion (originally RM 1.5 billion) and its application period was extended for another three years ending 
31 December 2015.
118 The Fund enables companies that are producers and users of green 
technology to obtain soft loans, with the Government subsidizing 2% of the interest rate and providing a guarantee of 60% on the amount of  financing. By September 2012, approximately 
RM 840 million had been approved to 69 local companies.  
3.4.2.1.2  SMEs 
3.96.  SMEs constitute 97.3% of total business establishments in Malaysia (98.5% under 
their 2013 definition)
119; the majority of SMEs are in the services sector (90%), followed by 
manufacturing (5.9%), agriculture (1%), and mining and quarrying (0.1%). In line with SME 
Masterplan 2012 objectives, a comprehensive action plan comprising 32 initiatives has been developed to overcome the challenges faced by SMEs in six focus areas (innovation and 
technology adoption, human capital development, access to financing, market access, legal and 
regulatory environment, and infrastructure).
120 The SME Masterplan, considered as the "game 
                                               
113 Batelle (2011).  
114 EIU (2012a).  
115 The 2013 Budget Speech . Viewed at: 
http://www.pmo.gov.my/dokumenattached/bajet2013/SPEECH_BUDGET_2013_28092012_E.pdf  
[5 March 2013]. 
116 In GERD terms, as of 2012 Malaysia ranked 33rd in the Top 40 Global R&D spending countries, higher 
than Indonesia but below Japan, Korea (Rep. of), In dia, Chinese Taipei, and Singapore (Batelle, 2011).  
117 The 2013 Budget Speech . Viewed at: 
http://www.pmo.gov.my/dokumenattached/bajet2013/SPEECH_BUDGET_2013_28092012_E.pdf  
[5 March 2013]. 
118 The 2013 Budget Speech . Viewed at: 
http://www.pmo.gov.my/dokumenattached/bajet2013/SPEECH_BUDGET_2013_28092012_E.pdf  
[5 March 2013]. 
119 The 2014 Budget Speech  introducing the Supply Bill (2014), "Strengthening economic resilience, 
accelerating transformation and fulfilling promises", 25 October 2013. Viewed at: http://www.fmm.org.my/upload/speech.pdf .  
120 A wide range of businesses, differing in dynamism , technical advancement, and risk attitude make 
up the SME sector. According to Malaysia's SME Masterplan 2012-2020, SME labour productivity in Malaysia is low relative to productivity levels in the south-east Asian region and in more advanced countries; there are WT/TPR/S/292 • Malaysia 
 
- 66 - 
 
  changer", is aimed, inter alia,  at raising productivity and intensifying re-entry of SMEs into the 
formal sector ("formalization"). It is expected  to raise the SMEs' GDP contribution from 32% 
(2012) to 40% by 2020, and their share of empl oyment and exports to 62% (59% in 2010) and 
25% (19% in 2010) respectively.  
3.97.  The Central Bank has provided funding th rough the Fund for Small and Medium Industries 
(since 2000) and New Entrepreneur Fund (since 2001) to financial institutions, at the concessionary rate of 1.5% p.a.; these funds are then channelled to SMEs as soft loans at rates 
ranging from 4% to 6%. In addition, the Centra l Bank has operated the Micro Enterprise Fund 
(since 2008) to assist micro enterprises with viable businesses to obtain financing from the participating financial institutions (section 4.7.2.5). For 2013, under the three Central Bank funds, a total of 139 programmes were planned and implemented in certain focus areas (access to 
financing, human capital development, infrastructure, innovation, technology adoption, market 
access); they targeted around 431,500 SMEs across all sectors with a financial commitment totalling RM 9.9 billion. In March 2009, the Government introduced an RM 10 billion fund under the 
Working Capital Guarantee Scheme for SMEs to facilitate access to working capital; the scheme 
guarantees up to a maximum of RM 2.5 million to qualified companies.
121 An RM 1 billion fund was 
to be provided in 2013 under the SME Development Scheme to facilitate SMEs' access to financing 
to further develop their businesses. To develop high-impact halal products for export, in 2013 the 
SME Bank with the cooperation of the Islamic Development Bank (IDB) was to provide RM 200 million to the Halal Industry Fund to finance the working capital of participating SMEs. SME Bank loans are available at interest rates (or profit margins for Islamic products) ranging 
from 3.75% to 7.5% depending on the source of funds.
122  
3.98.  The 2014 Budget provides for an allocation of RM 120 million for an integrated package to 
increase SME innovation and productivity.123 The package will provide financing for mechanization 
and automation as well as upgrading capacity of  SMEs. In addition, the Government provides 
various assistance and incentives under the Green Lane Policy programme for financing, tax incentives, and procurement, including: interest  rate subsidy of 2% or a maximum of RM 200,000 
per year; stamp duty exemption for loan agreements under the soft loan incentive scheme; tax 
deduction on expenses incurred for obtaining 1-InnoCERT certification; government procurement incentives, encompassing approved manufacturers status company registration without site visit as well as bonus marks given in technical evaluation; and priority incentives to participate in 
procurement by Ministry of Finance Incorporated (s ection 3.4.3) companies. These incentives were 
extended until 31 December 2017. 
3.4.2.2  Other subsidies 
3.99.  Malaysia continues to support agriculture in order to enhance the national income, ensure 
food security, improve productivity in the food se ctor, and stabilize prices of essential food items 
(sections 3.4.4.2, and 4.2.4). In 2013, an RM 5.8 billion (RM 2.3 billion in 2012) budgetary outlay 
was to cover, inter alia,  agricultural development programmes, including high-technology 
applications in fruit and vegetable production, incr ease the supply of high-quality seedlings, price 
stabilization, oil palm replanting, strengthening of paddy granaries, establishment of fish markets, and encouraging fish landings.
124 Rice, sugar (until 26 October 2013), and cooking oil prices are 
subsidized. According to Malaysia's latest WTO notification (of June 2009), in 2007 total support to 
agriculture consisted of measures exempt from reduction commitments and amounted to 
                                                                                                                                               
also disparities between rural- and urban-based firms (OECD, 2013b, "Chapter 2: Malaysia"; and National SME 
Development Council, 2012). 
121 The 2013 Budget Speech . Viewed at: 
http://www.pmo.gov.my/dokumenattached/bajet2013/SPEECH_BUDGET_2013_28092012_E.pdf  
[5 March 2013]. 
122 SME Bank online information. Viewed at: http://www.smebank.com.my/medium-sized-businesses . 
123 The 2014 Budget Speech  introducing the Supply Bill (2014), "Strengthening economic resilience, 
accelerating transformation and fulfilling promises", 25 October 2013. Viewed at: http://www.fmm.org.my/upload/speech.pdf .  
124 The 2013 Budget Speech . Viewed at: 
http://www.pmo.gov.my/dokumenattached/bajet2013/SPEECH_BUDGET_2013_28092012_E.pdf  
[5 March 2013]; and The Star,  "Economic Report 2012/2013: Subsidies to hit RM42.4b in 2012, decline in 
2013", 28 September 2012. Viewed at: 
http://biz.thestar.com.my/news/story.asp?file=/2012/9/28/business/20120928164242&sec=business  
[5 March 2013]. WT/TPR/S/292 • Malaysia 
 
- 67 - 
 
  RM 1 billion. Of this, 74.3% related to Green Box assistance mainly in the form of income support 
to paddy farmers and general services, while the rest involved the fertilizer subsidy scheme for 
paddy farmers.125  
3.100.  Energy subsidies remain in place for all consumers despite reduction/rationalization efforts 
undertaken in July 2010 and 2011 when rising oil and gas prices made the subsidy burden 
"unsustainable" (sections 3.4.4.2 and 4.5). Subsidies for liquefied petroleum gas, diesel, and gasoline rose from RM 9.6 billion in 2010 to RM 20.4 billion in 2011, RM 24.7 billion in 2012, and 
RM 20 billion in 2013. The subsidized gas price for the power sector allows the electricity tariffs to 
remain at favourable rates; by end 2012 PETRONAS had extended about RM 183.2 billion in gas subsidy to both the power and non-power sectors. In addition the Government controls the amount of rising fuels cost that can be passed through to power consumers. While intended to 
help poor households, fuel and energy subsidies tend to be especially badly targeted, in part 
because they indirectly subsidize automobile and other purchases that are affordable only by better-off households; they are also detrimental to government efforts to improve environmental 
quality and to promote greener growth.
126  
3.101.  In 2010, Malaysia began a rationalization effort to reform its subsidies regime through a 
phased five-year reduction of subsidies on gasoline, cooking gas, electricity, and road tolls, that 
was projected to save a cumulative total of US$33 billion.127 However, only minor reductions in 
diesel-fuel subsidies and an increase in electricity tariffs and the price of natural gas for the power sector entered into force in 2011. The initiative lost momentum in 2012 as the Government "changed its focus to mitigating the rising cost of living" issues. As a result, in 2012, Malaysia 
raised subsidies expenditure by 17% to RM 42.4 billion (4.5% of GDP, Table 1.1), compared with 
RM 36.3 billion (4.1% of GDP) in 2011, due to hi gher provision of fuel subsidies, the biggest 
burden.
128 In 2013, total allocation for subsidies amounted to RM 35.2 billion. Such subsidies have 
also encouraged over-consumption of both fuel and sugar, together with substantial smuggling 
activities, and has led to shortages; it seems that  subsidized diesel, sugar, and rice are illegally 
exported.129 Subsidy rationalization resumed with a petrol subsidy reduction of RM 0.20 per litre, 
effective 3 September 2013, and the elimination of the subsidy on sugar effective 
26 October 2013. To ensure a targeted subsidy system, the Government envisages gradually restructuring the subsidy programme; a portion of the savings from the restructuring would be distributed in the form of direct cash assistance, while the other half will be used to finance 
development projects.
130  
                                               
125 WTO document G/AG/N/MYS/25, 10 August 2009. 
126 OECD (2013b). 
127 The effort included measures to improve the targ eting of remaining subsidies on poorer households, 
including cash rebates to motorcycle and small-car owners. The Government had targeted a drop in the 
subsidy burden to RM 23.7 billion (14.6% of the GDP) in 2011 (OECD, 2013b; EIU, 2012a; and The Wall Street 
Journal,  "Malaysia Raises Power Prices", 30 May 2011. Viewed at: 
http://online.wsj.com/article/SB10001424052702303745304576355100982022960.html ). 
128 Nearly half of the total subsidies-related budgetary outlays for fiscal year 2010/11 (RM 15.9 billion) 
was spent on fuel subsidies, and another RM 1.6 billion in cooking-oil subsidies. The remainder went to subsidize other foods and utilities and for social assistance ( The Star,  "Economic Report 2012/2013: Subsidies 
to hit RM42.4b in 2012, decline in 2013", 28 September 2012. Viewed at: http://biz.thestar.com.my/news/story.asp?file=/2012/9/28/business/20120928164242&sec=business  
[5 March 2013]; and EIU, 2012a).  
129 It seems that Malaysian fishermen often abandon fish ing to sell fuel intended for their boats to their 
counterparts in countries like Thailand and Indonesia,  which do not offer simila r subsidies. According to 
Domestic Trade, Cooperatives and Consumerism Minister , Ismail Sabri Yaakob, in 2010 businesses eligible for 
subsidized sugar often over-ordered and sold illegally se ll their surplus to industries that are not targeted for 
subsidy. Such schemes can sometimes make it difficult  for consumers to locate and purchase commodities 
(Malaysiakini,  "Subsidies to eventually be lifted – slowly", 17 June 2010. Viewed at: 
http://www.malaysiakini.com/news/134768 ; and OECD, 2012b, "Structural Policy Country Note: Medium-term 
Policy Challenges: Malaysia").  See also the 2014 Budget Speech  introducing the Supply Bill (2014), 
"Strengthening economic resilience, accelerating tran sformation and fulfilling promises", 25 October 2013. 
Viewed at: http://www.fmm.org.my/upload/speech.pdf .  
130 The 2014 Budget Speech  introducing the Supply Bill (2014), "Strengthening economic resilience, 
accelerating transformation and fulfilling promises", 25 October 2013. Viewed at: http://www.fmm.org.my/upload/speech.pdf .  WT/TPR/S/292 • Malaysia 
 
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  3.4.3  Government-linked companies131 
3.102.  Although it has gradually reduced its direct participation in enterprises through past 
divestment and privatization efforts, Malaysia retains large industrial and commercial holdings at federal and state level, either directly through th e Ministry of Finance Inc. (the division of the 
Ministry of Finance overseeing investments) or indirectly through several fully state-owned entities 
in the form of government-linked corporations (GLCs), government-linked investment companies (GLICs), and statutory bodies.
132  
3.103.  GLCs and their controlling shareholders, the seven GLICs133, remain a significant part of 
the Malaysian economy as they have been used to spearhead infrastructure and industrial projects, and constitute the main actors in oil and gas, key strategic utilities, and services including electricity, telecommunications, postal services, airlines, airports, public transport, water 
and sewerage, banking and financial services.
134 GLCs employ an estimated 5% of the workforce, 
and accounted for approximately 36% and 54%, respec tively, of the market capitalization of Bursa 
Malaysia135 and the benchmark Kuala Lumpur Composite Index. In April 2012, there were 
33 non-financial public enterprises (NFPEs), of which 8 are listed on the Bursa Malaysia, and the 
Government operated more than 200 industrial estates through its 13 state economic development corporations (SEDCs).
136 The three largest NFPEs are PETRONAS (petroleum), Tenaga Nasional 
(electricity) and Telekom Malaysia (telecommunications), which together generated around two 
thirds of the estimated aggregate NFPE revenues of RM 307.4 billion in 2011. Another 30 GLCs listed on the Bursa Malaysia are either financial public enterprises or companies controlled through GLICs; they are involved in, inter alia , automotive, tractors, and building activities.
137 The Ministry 
of Finance Inc. had partial or full ownership in  95 companies. No data on the production and 
trading (domestic sales, imports, exports) activities of all GLCs/SOEs since 2010 were provided by the authorities. 
3.104.  Procurement policies for GLCs and other SOEs seem to be similar to those of ministries and 
other government bodies although they are not governed by the same rules (section 3.2.6). Procurement from local sources, including  bumiputera suppliers is encouraged, with a view to 
supporting national economic development (section 2.3
138 and section 3.2.6139). In 2011, GLCs 
gave bumiputera  companies RM 81.6 billion (out of RM 159.3 billion) of procurement contracts, 
through an allegedly merit-based selection process.140 As from 1 January 2012, the date of entry 
                                               
131 No information or comments were provid ed by the authorities on this section. 
132 Presentation of the Malaysia Competition Commission on State Owned Enterprises and Competitive 
Neutrality at the OECD Global Forum on Competition, Session III, Paris, 16-17 February 2012. Viewed at: http://www.oecd.org/countries/malaysia/49771569.pdf ; and EIU (2012a). 
133 GLCs are controlled by GLICs such as Khazanah Na sional (the Government's sovereign wealth fund), 
Permodalan Nasional or the Employees Provident Fund  (EPF), holds control. Khazanah owns stakes in 
companies competing in many of the country's major in dustries, and the Prime Minister chairs its Board of 
Directors (EIU, 2012a; and U.S. Department of Commerce/U.S. Commercial Service, 2012). 
134 State-owned entities own sizeable stakes in the financial sector, including in the two largest domestic 
commercial banks: Malayan Banking (Maybank) and CIMB  Bank. The Government has traditionally used this 
control to, inter alia,  help fund political programmes and to grant loans in exchange of favours, though these 
practices have become less common with improvements in corporate governance (s ection 3.4.5) (Putrajaya 
Committee on GLC High Performance online information. Viewed at: http://www.pcg.gov.my/FAQ.asp ; 
U.S. Department of Commerce/U.S. Commercial Service, 2012; and EIU (2012a).  
135 GLCs in which the Government holds a controlling stake represented 5% of all companies listed on 
Bursa Malaysia in April 2012. Only a minority portion of stock is available for trading for some of the largest publicly listed companies (EIU, 2012a ; and U.S. Department of Commerce/U.S. Commercial Service, 2012). 
136 SEDCs often offer incentive packages to inve stors, and several have set up manufacturing 
enterprises, sometimes jointly with the federal government an d sometimes with privat e (including foreign) 
investors (EIU, 2012a). 
137 They are: Affin; Avenue Capita l Resources; Boustead Holdings; CIMB Bank; CIMB Group (formerly 
Bumiputra-Commerce Holdings); Guthrie Ropel; Island & Peninsular; Kinta Kellas; Malayan Banking; Malaysia Building Society; Malaysia National Reinsurance; Malaysian Industrial Development Finance; NCB Holdings; PLUS Expressways; MNI Holdings; Petaling Garden; Pharmaniaga; Proton; RHB Bank; Sime UEP; Time 
DotCom; Time Engineering; Tractors Malaysia; UEM Builders; UEM World; and UMW Holdings (EIU, 2012a).  
138 In 2010, several initiatives were launched by the Prime Minister aimed at transforming the country, 
including the New Economic Model (NEM) (March 2010), the Government Economic Transformation Programme (ETP), and the 10
th Malaysia Plan (the Government's development programme for 2011). 
139 SOEs seem to let politicians grant contracts or concessions to favoured entities (EIU, 2012a; and 
USTR, 2012a).  
140 Putrajaya Committee on GL C High Performance (2012). WT/TPR/S/292 • Malaysia 
 
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  in force of the 2010 Competition Act (section 3.4.4.1), all commercial activities, regardless of 
ownership and status (i.e. including those carried out by GLCs and other SOEs) have been under the same provisions.  
3.105.  During the period under review, Malaysia pursued its GLC Transformation Program 
(2005-15) aimed at turning GLCs into stronger and more resilient and competitive companies and 
into "regional champions", without directly privatizing them. The programme, now in its final phase, covers the larger GLC firms (termed as G-20).
141 The Government would, inter alia,  like to 
see these companies gradually dispose of their non-core assets and increase collaboration with the 
private sector.142 In its April 2012 review of the process, the Putrajaya Committee on GLC High 
Performance noted that the G-20 companies at that time were on a robust growth trajectory while making further inroads in regional markets. Several GLCs were well on their way to become 
regional players and even leaders, such as Ax iata Group Berhad, Malayan Banking Berhad, CIMB 
Group Holdings Berhad and Sime Darby Berhad; wh ose foreign assets (as a percentage of total 
assets) grew from 13% to 26% over the same period.
143 During financial years 2004 to 2011, 
G-20 foreign sales (as a percentage of total sales) grew from 26% to 33%. G-20 GLCs employed 
almost 360,000 employees and were a net creator of 16,210 jobs in 2011. The liberalization of 
some sectors in Malaysia, the move towards free-trade agreements, and the entry into force of the 
2010 Competition Act intensified competition challenges for GLCs.  
3.106.  In the context of the 2010 NEM reforms and the 10th Malaysia Plan, in July 2011 the 
Government showed an increasing interest in restarting its privatization efforts without giving specific targets. It listed 33 GLCs as ready for divestment; the plan would be to reduce its stakes 
in some of these companies, list a few others, and sell the rest.
144 These divestment efforts would 
affect, inter alia,  state companies such as CTRM Aero Composites, Nine Bio, Inno Bio Ventures, 
Penang Port, the loss-making Malaysia Airlines, an d Proton, the troubled car-maker (section 4.6). 
Despite discussions on possible strategic partnerships in recent years, none has led to actual deals 
y e t ,  a s  d i v e s t m e n t  o r  r e f o r m  a p p e a r  t o  r e m a i n  contentious in certain areas (e.g. healthcare 
services). The privatization programme stipulates that bumiputeras should take up at least 30% of 
equity of a privatized entity, and foreign participation is limited to 25% of share capital, though 
the Government may grant waivers. As a prelude or an alternative to privatization, some government agencies have been corporatized. The Malaysian Industrial Development Authority, now renamed Malaysian Investment Development Authority, was corporatized in October 2011, 
and the corporatization of Radio Televisyen Malaysia (RTM, the state broadcaster) was planned for 
the second half of 2012.  
3.4.4  Competition and consumer protection policy 
3.4.4.1  Competition policy 
3.107.  Since the previous TPR of Malaysia, th e legal and institutional framework governing 
competition policy has changed significantly in line with ASEAN commitments (section 2.4.2). 
Malaysia's first comprehensive Competition Act was passed on 6 May 2010 and entered into force 
on 1 January 2012, giving businesses a sufficient grace period to comply with the law.
145 The 
2010 Competition Act set two types of prohibition but does not address the issue of a merger 
                                               
141 In 2012, there were 17 GLCs in G-20 due to variou s mergers, de-mergers, and corporate exercises: 
Affin Holdings Berhad, BIMB Holdings Berhad, Bouste ad Holdings Berhad, Bumiputra-Commerce Holdings 
Berhad, Chemical Company of Malaysia Berhad, Malaya n Banking Berhad, Malaysian Airline System Berhad, 
Malaysia Airports Holdings Berhad, Malaysian Building Society Berhad, Malaysian Resources Corporation Berhad, Pos Malaysia & Services Holdings Berhad, Pr oton Holdings Berhad, Sime Darby Berhad, Telekom 
Malaysia Berhad, TM International Berhad, Tenaga Nasional Berhad, TH Plan tations Berhad, UEM World 
Berhad, and UMW Holdings Berhad (Put rajaya Committee on GLC High Perform ance online information. Viewed 
at: http://www.pcg.gov.my/ ; and Putrajaya Committee on GLC High Performance, 2012). 
142 EIU (2012a). 
143 G-20 employ 147,230 employees in 40 countries, with 1,509 branch offices in ASEAN alone. 
144 According to the Economic Planning Unit (EPU), the authorities privatized 513 entities (though this 
includes an unspecified number of public private partnership projects) over 1983-2010 (but just ten in 2010). More than 113,000 jobs were transferred to the private sector over this period. Of the companies or projects privatized during this period, co nstruction accounted fo r 16.6%, followed by manufacturing (13.6%), and 
transport, storage and communications (13.1%) (U .S. Department of Commerce/U.S. Commercial 
Service, 2012; and EIU, 2012a).  
145 EIU (2012a).  WT/TPR/S/292 • Malaysia 
 
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  control regime.146 One prohibition affects anti-competitive agreements between enterprises that 
operate in the same sector through price fixing, market sharing, limiting or controlling market 
access, and bid rigging arrangements; and the other covers abuse of a dominant position by an enterprise in any market for goods or services.
147 Guidelines on market definition, on anti-
competitive agreements, and on complaints procedures were issued in May and July 2012.148 The 
2010 Act covers all commercial activity (including of  GLCs (section 3.4.3)), except for a number of 
anti-competitive practices, agreements or activities (e.g. energy149 and communications),  both 
within and outside Malaysia that have an effect on competition in any market within the country.150 
In certain sectors, competition is regulated via control over prices and entry conditions (section 3.4.4.2), such as permits and licences (state-owned Padiberas Nasional, for example, 
holds a monopoly on rice imports (sections 3.2.7, and 4.2.5)) mostly to advance social goals, such 
as the affirmative-action programmes benefiting bumiputeras , rather than to enhance competition. 
The 2010 Act is expected to be extended to cover all controlled sectors, though a specific timetable had not been announced in April 2012.
151 Furthermore, the Industrial Co-ordination 
Act 1975 (ICA) (sections 1.4.2.3 and 2.5.1), which requires manufacturing companies with 
shareholders' funds of RM 2.5 million and above or  engaging 75 or more full-time paid employees 
to apply for a manufacturing licence for MITI approval,152 could, if necessary, ensure new investors 
that there will be no excessive investments in the same area; some manufacturing activities within 
the purview of other ministries such as milling of oil palm fresh fruits into crude palm oil, production and processing of raw natural rubber, and milling of paddy into rice are exempt from 
ICA requirements. According to the authorities, Malaysia is not ready for a competitive neutrality 
                                               
146 According to data provider Bloomberg (United St ates), the total value of Malaysia's announced 
merger-and-acquisition (M&A) deals, both locally and abroad, reached US$12.1 billion in the first half of 2011. According to the PricewaterhouseCoopers (United States) consultancy, M&A deals had jumped to US$36 billion in 2010, from US$13.3 billion in 2009. The main drivers of lo cal M&A activity in the first half of 2011 were the 
finance, construction, and property sectors (EIU , 2012a; Malaysia Competition Commission, 2011; and 
U.S. Department of Commerce/U.S. Commercial Service, 2012). 
147 Under the 2010 Act, dominant po sition is defined as a situatio n where one or more enterprises 
possess significant market power to adjust prices or outp uts or trading terms, without effective constraint from 
competitors or potential competitors. There is no clear threshold for each competition area but mere 
explanation of "unfair" acts. Exem ptions for horizontal and vertical  agreement might be granted on a 
case-by-case basis by the Commission, provided that the total benefits exceed the negative effects. As it 
stands, the Government seem s to remain quite accommodating of ma rket dominance; in  general, the MyCC 
will consider a market share above 60% as indicative  that an enterprise is dominant. Given its active 
participation in business and its desire to nurture infant  industries, it provides pr otection from co mpetition to 
specific enterprises through government procuremen t (section 3.4.3) and trade licensing (EIU, 2012a). 
148 See http://www.mycc.gov.my/guideline.asp . 
149 The authorities consider that since the state-owned PETRONAS must compete with well-established 
oil companies, it should be granted blanket approval au thority in distributing and marketing fuel. Similarly, 
restrictions on foreign bank branch es have protected local commercial banks, though these privileges are 
slowly being eroded as Malaysia opens its financial sector (section 4.7) (EIU, 2012a).  
150 More specifically, it applies to and covers all kinds of "goods", which includes all kinds of products, 
buildings, and other structures, vessels and vehicles, utilities like provision of clean water and sewerage, minerals, trees and crops, as well as animals including fish. Activities not covered by the Competition Act 2010 include: activities involving an exercise of government al authority; activities carried out pursuant to the 
principle of solidarity; and purchases of goods or servic es not intended for resale or "re-supply". Furthermore, 
the 2010 Act does not apply to commercial activities that are regulated by the Communications and Multimedia Act 1998 and the Energy Commission Act 2001. Other exclusions are: agreements or conduct that complies with the law; collective bargaining or collective agre ement between employers and trade unions on behalf of 
employees; and services of general economic interest, which cover publ ic utilities, or have the character of a 
revenue-producing monopoly (Malaysia Competition Commission, 2011; and EIU, 2012a). 
151 According to the authorities while Malaysia ende avours to enforce the competition policy and law 
regime effectively, other policy considerations may also be taken into consideration, depending on the circumstances, for the effici ent functioning of the economy and socio po licy goals. In this regard, the concept 
of competitive neutrality has not been fully recognized in Malaysia, and there are no plans to include it in the 
policy framework of the competition policy (EIU, 2012a).  
152 An existing manufacturing company (formerly exem pted) is required to apply for regularization, 
i.e. a manufacturing licence once it  reaches this licensing threshold. WT/TPR/S/292 • Malaysia 
 
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  principle.153 According to the OECD, evidence suggests that open competition in Malaysia remains 
elusive.154 
3.108.  Since 1 April 2011, responsibility for competition policy has been with Malaysia 
Competition Commission (MyCC), an independent enforcement body under the Ministry of 
Domestic Trade, Cooperatives and Consumerism (MDTCC), established under the Competition 
Act 2010. In 2012 and 2013, the MyCC's focus remain ed on advocacy and capacity building; over 
this period a total of 63 advocacy programmes for various government bodies and business 
associations were organized and completed. The MyCC, is empowered to conduct a review into any 
market in determining whether there are distortions to the competitive process; its findings and recommendations are published.
155 Individuals may file complaints with the MyCC to request an 
investigation. Violations are punishable by fines, as well as imprisonment; the maximum penalty is 
10% of the worldwide turnover of an enterprise ov er the period of infringement. The 2010 Act also 
established a Competition Appeal Tribunal with exclusive jurisdiction to hear all appeals and to review any decision  by the MyCC.  
3.109.  Since its establishment, MyCC has conducted two public consultations covering the 
domestic broiler market and the proposed Block Exemption Order (BEO) for liner shipping agreements. The MyCC issued a decision against the Cameron Highlands Floriculturist Association 
(CHFA) for price-fixing on 6 December 2012. On 6 September 2013 a proposed decision was under 
consideration on Malaysia Airlines System Berhad, and AirAsia Berhad for entering into a market-sharing agreement within Malaysia. On 1 November 2013, the MyCC issued its Proposed Decision on Megasteel Steel Sdn Bhd (Megasteel) for abuse of dominant position; a financial 
penalty amounting RM 4.5 million was proposed.
156 On 20 September 2013 it issued proposed 
interim measures against the Pan-Malaysia Lorry Owners Association, its members and related lorry enterprises on a probable infringement for agreeing to fix an increase of transportation 
charges by 15%.
157  
3.110.  Some bilateral/regional free-trade agreements, such as the Japan-Malaysia Economic 
Partnership Agreement, the ASEAN-Australi a New Zealand Free Trade Agreement, the 
Malaysia-New Zealand FTA, and the Malaysia-Australia FTA, include provisions on competition 
(section 2.4.2). At the regional level, Malaysia is a signatory to the declaration on the 2007 ASEAN Economic Community (AEC) Blueprint which, inter alia , is aimed at introducing comprehensive 
competition laws in all ASEAN member countries by 2015, on a best endeavour basis, and to 
establishing a network of authorities among member countries for discussion and coordination on 
competition policies. Malaysia also participates in the ASEAN Experts Group on Competition (AEGC), which aims to develop capacity and a forum for discussion on competition policies in the ASEAN region. 
3.4.4.2  Price and supply controls 
3.111.  Price and supply controls remain in place. During the review period, the legal framework 
was updated with the Price Control and Anti-Profiteering Act 2011, in force from 1 April 2011, 
replacing the Price Control Act 1946.
158 Under the 2011 Act, an important step prior to the possible 
                                               
153 Competitive neutrality means that state-owned an d private businesses compete on a level playing 
field. This is essential to use resources effectively within the economy and thus achieve growth and development (OECD, 2012a; and Malaysia Competition Commission presentation on State Owned Enterprises and Competitive Neutrality at the OECD Global Forum on Competition, Session III, Paris, 16-17 February 2012. 
Viewed at: http://www.oecd.org/countries/malaysia/49771569.pdf ).  
154 The OECD study indicates the following case in point. Some industry players have alleged that the 
Government's "adoption" of some bumiputera  pharmaceutical companies has resulted in the adopted 
companies being given five-year contracts to exclusively provide specific medication to the Health Ministry. 
These companies, which do not have to participate in an open tender for the product, also negotiate directly on 
price with the ministry (OECD, 2013b, "Chapter 2: Malaysia"). 
155 Malaysia Competition Commission (2011). 
156 Malaysia Competition Commission Press Release, 1 November 2013. Viewed at: 
http://www.mycc.gov.my/news.asp?page=pressRelease_view&newsid=1356 .  
157 Malaysia Competition Commission Press Release, 20 September 2013 . Viewed at: 
http://www.mycc.gov.my/news.asp?page=pressRelease_view&newsid=1286 . 
158 Ministry of Domestic Trade, Cooperatives an d Consumerism online in formation. Viewed at: 
http://www.kpdnkk.gov.my/en/barang-harga-terkawal ; and Laws of Malaysia, "Price Control and 
Anti-Profiteering Act 2011", 24 January 2011. Viewed at: http://www.kpdnkk.gov.my/kpdnkk-
theme/images/pdf/723_PRICECONTROLANDANTI-PROFITEERINGACT2011.pdf.   WT/TPR/S/292 • Malaysia 
 
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  introduction of GST (section 1.4.2.1), the MDTC C enforces price controls by setting maximum, 
minimum or fixed prices for manufacturing, producing, wholesaling or retailing of any essential goods and services. Currently, five goods (petrol (RON 95), diesel, liquefied petroleum gas (LPG), 
cooking oil, and wheat flour) are under administrative control under the Control of Supplies 
Act 1961; these items are subsidized and subject to ceiling prices set by the Government. In 
addition, sugar and face masks are subject to maximum wholesale and retail prices set under the Price Control and Anti-Profiteering Act 2011.
159 Furthermore, under the 2011 Act, the 2000 Festive 
Season Price Controlled scheme requires producers to provide an adequate supply of essential food 
items up to a ceiling price during six specified festive seasons. Price ceilings appear to differ on occasion, depending on the origin of goods and/or the  states/areas/districts.
160 The price of rice is 
controlled by law and is administered by the Minist ry of Agriculture and Agro-Based Industry under 
the Rice (Grade and Price Control) Order 1992 (revised in 2008). Failure to comply (first time) with 
price control requirements (either by selling or purchasing) is subject to a penalty of up to RM 100,000 and/or three years of imprisonment for individuals, or RM 500,000 for corporates.
161  
3.112.  Under the Control of Supplies Act 1961 (last revised in 1973), which prohibits the 
purchase, sale or barter of any controlled article without written permission, the MDTCC controls the supply of 22 items including sugar,
162 milk, rice, chicken, prepared or preserved fish, wheat 
flour, cooking oil, salt, cement, mild steel round bars, fertilizers, pesticides, rubber wood, face 
masks, and virtually all types of fuel (e.g. petrol, diesel, kerosene, LPG).163 The MDTCC ended 
licensing rules for trade in chicken meat, cement, and mild steel round bars on 15 July 2010.164 
Under the 1961 Act, government subsidies have applied to six controlled goods (sugar (until late 
October 2013),165 general purpose wheat flour, cooking oil, diesel, petrol RON 95, liquefied natural 
gas) (section 3.4.2.2). Under the Control of Supplies (Prohibition on Export) Regulations 2011, as from 15 March 2011 the exportation of four of these items (i.e. wheat flour, diesel, petrol RON 95, 
LPG) has been prohibited unless written permissi on is granted by the Controller of Supplies; 
exports of sugar and cooking oil are also prohibited unless an export licence is delivered by MITI for the former or the Malaysian Palm Oil Board (MPOB) under the Malaysian Palm Oil Board 
(Licensing) Regulations 2005 for the latter.
166 Despite plans for a gradual subsidies reduction 
for 2010-12 (section 3.4.2.2), it is estimated that RM 32.8 billion, or 18.2% of operating expenditure, was spent on subsidies in fiscal year 2010/11, rising sharply from RM 23.1 billion in the previous fiscal year. An estimated RM 33.2 billion was budgeted for fiscal year 2011/12.
167 The 
biggest burden is subsidies on fuel prices (section 3.4.2.2), which are among the lowest in Asia. 
                                               
159 The price of sugar is still cont rolled at RM 2.84/kg (retail). 
160 Between August 2011 and June 2012, the 25 controlled goods declared during festive seasons 
included butter, cheese, margarine, bottled drinks, raw meat, eggs, fruits,  several vegetables, pepper, chilies, 
rice, and corn flour. Under the festive price co ntrolled scheme implemente d for 15 days from 12 to 
26 August 2012, price ceilings were mainly for Kuala Lumpur and Putrajay a while certain states (including 
Sabah and Sarawak) would have different  levels. For certain food items, the ceiling prices were set exclusively 
for imported products (groundnuts, onion, garlic, potato es) while the ceiling prices for imported beef set at 
RM 22 (Sarawak only) and RM 21 for Indian beef buffalo were lower than for local beef (RM 24). ( The 
Malaysian Insider,  "Price controls for 20 items ahead of Aidilfitri", 2 August 2012. Viewed at: 
http://www.themalaysianinsider.com/malaysia/article/price-controls-for-20-items-ahead-of-aidilfitri ; EIU, 
2012a; and Ministry of Domestic Trade, Co-operatives and Consumerism online information, "Festive Seasons 
Price Controlled Scheme Enforcement". Viewed at: http://www.kpdnkk.gov.m y/penguatkuasaan-skim-
kawalan-harga-musim-perayaan ). 
161 Laws of Malaysia, Price Control and Anti–Profiteering Act 2011, 24 January 2011. Viewed at: 
http://www.kpdnkk.gov.my/kpdnkk-theme/ images/pdf/723_PRICECONTROLANDANTI-
PROFITEERINGACT2011.pdf . 
162 Malaysia is import dependent fo r its domestic needs. The consiste nt supply of sugar is ensured 
through a commercial long-term contract (LTC). Raw sugar is imported under the LTC and processed into 
refined sugar for dome stic consumption. 
163 Ministry of Domestic Trade, Co-operatives and Co nsumerism online information, "List of controlled 
goods". Viewed at: http://www.kpdnkk.gov.my/en/se narai-barang-barang-kawalan . 
164 EIU (2012a).  
165 The sugar subsidy of RM 0.34 was abolished as of 26 October 2013 (the 2014 Budget Speech  
introducing the Supply Bill (2014), "Strengthening econ omic resilience, accelerating transformation and 
fulfilling promises", 25 October 2013. Viewed at: http://www.fmm.org.my /upload/speech.pdf ).  
166 Ministry of Domestic Trade, Co–operatives an d Consumerism list of go vernment subsidies on 
controlled goods. Viewed at: http://www.kpdnkk.gov.my/en/barang-barang-kawalan-bersubsidi ; and the 
2011 Control of Supplies (Prohibition of Exports) Regulations list. Viewed at: 
http://www.kpdnkk.gov.my/en/barang-barang-kawalan-yang-dilarang-eksport . 
167 Only minor reductions in diesel-fuel subsidies entered into force in July 2011; no other cuts had been 
announced by April 2012 (EIU, 2012a). WT/TPR/S/292 • Malaysia 
 
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  Nearly half of the total for 2010/11 (RM 15.9 billi on) was spent on fuel subsidies and another 
RM 1.6 billion on cooking-oil subsidies.  
3.4.4.3  Consumer protection 3.113.  Malaysia's consumer protection framewor k has been changed since its previous TPR. In 
addition to the Consumer Protection Act 1999 (last amended in 2010), Malaysia has a number of 
laws to regulate the activities of enterprises and protect consumer interests (section 3.4.4.2).
168 
The Act's latest amendments expanded its provis ions, introduced the unfair contract terms, and 
established the Committee on Advertisements. A long-awaited Personal Data Protection Act 2010, 
in force as from June 2012, regulates the collection, possession, processing, and use of personal data, and ensures that there are adequate measures for the security, privacy, and handling of personal information.
169 Other regulatory changes comprised: the Consumer Protection (Credit 
Sales) Regulations 2012 (from 1 October 2012) ensuring that the credit facility provider 
transparently discloses all important information to consumers before the transaction happens; Guidelines to Prevent False or Misleading Advert isement; and Guidelines on Consumer Redress, 
ensuring that both the consumer and businesses understand their rights and responsibilities in 
claiming and implementing redress. The MDTCC cont inues to administer most of these laws, and, 
inter alia,  provide programmes on consumers' education and a channel for consumers to file claims 
for compensation on bad quality products and services via the Tribunal for Consumer Claims. 
Under the purview of MDTCC, this tribunal deals with consumer claims for damages of not more than RM 25,000 against sellers, manufacture rs or suppliers of goods and services.
170  
3.114.  A "Buy Malaysia Campaign" was re-launched in 2009 aimed at changing the perception of 
domestic brand items that are on par with international standards but retailed at reasonable 
prices; it is still ongoing.171 This campaign, which is also run by the MDTCC and costs 
RM 10 million each year (since 2009), also serves  to stimulate economic growth by increasing 
consumption of Malaysian-made products. No measurement of the positive impact for domestic 
product penetration in the local market since 2010 was available from the authorities. The 
definition for Malaysian brand items for the purpose of this campaign is "all products or services 
offered by companies owned by Malaysians who al so own the brands". The campaign involves the 
organization of Buy Malaysian Products Expositions and awareness campaigns through the mass and social media; a total of 19 expositions were organized during 2010-12.  
3.4.5  Corporate governance 
3.115.  Since its previous TPR, Malaysia, a regional leader in corporate governance (CG), has 
made substantial progress in further improving its legal and regulatory framework in this area.
172 
A five-year Corporate Governance Blueprint, launched by the Securities Commission Malaysia (SC) 
on 8 July 2011, provided the action plan for raisin g CG standards by strengthening self and market 
                                               
168 Other laws on consumer rights include the Trad e Descriptions Act 1972, the Control of Supplies Act 
1983, the Food Act 1983, and the Direct Sales Act 1993 (EIU, 2012a). 
169 EIU (2012a). 
170 Ministry of Domestic Trade, Co-operatives an d Consumerism online information. Viewed at: 
http://www.kpdnkk.gov.my/en/pengguna/ttpm/pengenalan . 
171 Ministry of Domestic Trade, Co-operatives an d Consumerism online information. Viewed at: 
http://www.kpdnkk.gov.my/en/kempen-beli-barangan-malaysia . 
172 According to the 2012 World Bank Corporate Govern ance Report on Observ ance of Standards and 
Codes (ROSC), its overall scores are higher than the av erage scores of countries within the Asian region. In 
each of the six main areas of corporate governance po licy framework, Malaysia's score surpassed the average 
for Indonesia, India, Thailand, the Philippines, and Vi et Nam. Out of the six OECD  Principles for Corporate 
Governance examined in the 2012 report, Malaysia scored highest in term of equitable treatment of stakeholders, enforcement and institutional framework, as well as disclosure and transparency. The report also 
confirms that Malaysia has achieved high levels of compliance in a number of key areas, both fundamental and more sophisticated, like the prohibition of insider trading and implementation of high-quality accounting standards (Securities Commission Malaysia Press Release, "World Bank recognises Malaysia as a regional leader in corporate governance", 26 February 2013; The Star , "World Bank calls Malaysia a regional leader in 
corporate governance, but there's more to be done", 2 March 2013. Viewed at: http://biz.thestar.com.my/news/story.asp?file=/2013/3/2/business/12780123 ; and MoneyCompass  online 
information, "World Bank recognises Malaysia as a re gional leader in corporate governance". Viewed at: 
http://moneycompass.com.my/en/world-bank-recogni ses-malaysia-as-a-regional-leader-in-corporate-
governance/ ). WT/TPR/S/292 • Malaysia 
 
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  discipline and promoting greater internalizat ion of the culture of good governance.173 The Blueprint 
focuses on six connected themes of the corporate governance ecosystem: shareholder rights; the roles of institutional investors; boards; gatekeepers and influencers; disclosure and transparency; as well as public and private enforcement. Following the CG Blueprint, a Malaysian Code on 
Corporate Governance 2012 (MCCG 2012) entered into force on 31 December 2012 superseding 
the 2007 Code. It sets out broad principles and specific recommendations on structures and processes that companies should adopt in making good corporate governance an integral part of 
their business dealings and culture.
174 The MCCG 2012 focuses on strengthening board structure 
and composition, recognizing the role of director s as active and responsible fiduciaries. Main 
principles included roles and responsibilities of leaders, moving towards sustainability, protecting 
company and social ethical standards, fostering independence, and commitments.175 Several key 
recommendations of the MCCG 2012 will be implemented through the Bursa Malaysia Listing 
Requirements while others require changes to the legislation. Listed companies are expected to 
report on their compliance with the MCCG 2012 principles and recommendations in their annual 
reports. As in the case of the 2007 Code, GLCs are expected to abide by the Code, as well as 
GLC-specific guidelines for best practices issued by the Putrajaya Committee on GLC High Performance (section 3.4.3). At present the monito ring of CG disclosure statements is limited.   
3.116.  During the review period, other changes involved the amendment in 2010 of the Capital 
Markets and Services Act 2007 to empower the SC to  act against directors of listed companies who 
cause wrongful loss to their company, and against any person who misleads the public through falsely preparing or auditing the financial statements of companies.
176 An Audit Oversight Board 
was established, and became operational on 1 Apri l 2010, to provide effective oversight of auditors 
of public-interest entities. In 2011, the Securiti es Industry Dispute Resolution Center (SIDREC) 
was established to facilitate the resolution of small claims by investors. Malaysia also committed to 
full convergence with the International Financial Reporting Standards (IFRS)  by January 2012; as 
a result, the financial statements of the SC and SIDREC have been prepared in accordance with IFRS. The Companies (Amendment) Act 2007, which entered into force on 15 August 2007, 
remains unchanged and seems to lack clarity on a range of issues. According to the 2012 World 
Bank Corporate Governance Report on Observance  of Standards and Codes, maintaining investor 
confidence will require reform to continue in ar eas such as protection of smaller shareholders; 
disclosure of beneficial ownership and other non-financial information; strengthening of auditor 
independence and effectiveness of market intermediaries; reviewing the role of government-linked 
investment companies and other institutional investors and owners, and maintaining the credibility and effectiveness of the SC.
177  
3.4.6  Intellectual property rights 
3.117.  Malaysia remains committed to protecting and enforcing intellectual property rights (IPR) 
and to pursuing necessary legislative and regu latory improvements, and has made important 
progress with respect to the protection and enforc ement of IPR over the past few years, in line 
with its 2007 National Intellectual Property Policy (NIPP).178 During the review period, Malaysia 
passed significant amendments to its patent, indu strial designs, copyright, and trademark laws 
(sections 3.4.6.1 and 3.4.6.2). It also expanded its IP commitments by becoming a party to the 
WIPO Copyright Treaty, and Performances and Phonograms Treaty, both in effect from 
27 December 2012; Malaysia is a signatory to 8 of the 25 treaties administered by WIPO.179 The 
TRIPS Council reviewed Malaysia's IPR legislation in November 2001.180 
                                               
173 Securities Commission Malaysia online information. Viewed at: 
http://www.sc.com.my/main.asp?pageid=1088&menuid=332&newsid=&linkid=&type=S . 
174 Corporate Governance Blueprint 2011 online information. Viewed at: 
http://www.sc.com.my/main.asp?pageid=1087&menuid=&newsid=&linkid=&type= ; and Securities 
Commission Malaysia (2011b and 2012).  
175 Securities Commission Malaysia (2012). 
176 Securities Commission Malaysia (2011b).  
177 The Star , "World Bank calls Malaysia a regional leader  in corporate governance , but there's more to 
be done", 2 March 2013. Viewed at: http://biz.thestar.com.my/news/story.asp?file=/2013/3/2/business/12780123.  
178 More information about the NIPP is avai lable in WTO document WT/TPR/S/225/Rev.1, 
15 February 2010. 
179 Malaysia is also a signatory of the Berne Convention, the Nice Agreement, the Paris Convention, the 
Patent Cooperation Treaty, the Vienna Agreement, and th e WIPO Convention (WIPO online information. Viewed WT/TPR/S/292 • Malaysia 
 
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  3.118.  Malaysia, a signatory to the ASEAN Fr amework Agreement on Intellectual Property 
Co-operation, participates in the ASEAN Working Group on Intellectual Property Cooperation (AWGIPC), in which it was agreed to replace the ASEAN Regional Trade Mark Filing System with the Madrid Protocol for the International Registration of Marks by 2015. Malaysia also took part in 
launching the 2009 ASEAN Patent Examination Co-operation (ASPEC) programme to allow 
applicants from participating countries to obtain corresponding patents faster and more efficiently.
181 Under ASEAN's IPR Action Plan 2011-2015, which comprises 28 initiatives under 
5 strategic goals, at the 40th AWGIPC Meeting in March 2013, Malaysia committed itself to be the 
Country Champion for six initiatives:  reducing the average turnaround time (from filing to 
registration) for the registration of trade marks without objections/opposition to 6 months by 2015; effectively using the copyright system by 2015; establishing collective management 
societies in ASEAN member states by 2015; protecting geographical indications (GIs); enhancing 
the capability of SMEs in the ASEAN member states to generate and fully utilize intellectual property (section 3.4.6.2); and capacity building for patent examiners.
182 The Trans-Pacific 
Partnership negotiations (section 2.4.2), in which Malaysia is actively involved, aim, inter alia,  at a 
high-level Intellectual Property chapter, which would extend copyright protection, impose high-level enforcement standards, and deal with pharmaceuticals and access to medicines.
183 
Malaysia cooperates, inter alia , with the WIPO, ASEAN IP Offices, IP Australia, the European Patent 
Office (EPO), Japan Patent Office (JPO), Korean Intellectual Property Office (KIPO), the UK Patent 
Office (UKPO), the United States Patent and Tr ademark Offices (USPTO), and other intellectual 
property offices.  
3.119.  The Intellectual Property Corporation of Malaysia (MyIPO) remains the principal agency 
responsible for IPR policy development and administration. MyIPO handles industrial property protection as well as copyrights. It examines and registers industrial property protection, provides 
advisory services, stores and publishes information and statistical data, and provides training 
programmes. MyIPO has reduced the pendency period for patents (from 38 months in 2010 to 26 months in 2011) and trade marks (from 18 months to 12 months in 2011).
184 
3.4.6.1  Industrial property 
3.120.  Since 2002, Malaysia has provided incentives for domestic companies to register their 
industrial property rights. In computing income tax resident companies may deduct the following expenses: costs to acquire patents, designs, mo dels, plans, trade marks or brands, and other 
similar rights from foreigners.
185 In tax assessment years 2010-14, SMEs are also allowed to 
deduct the registration costs of patents and trade marks.  
3.4.6.1.1  Patent and utility models 
3.121.  Patent protection under the Patent Act of 1983 (last amended in 2006) is for 20 years from 
the date of filing. Both product and process patents may be granted. A utility innovation (i.e. utility 
model), an exclusive right granted for a "minor" invention, which does not have to satisfy the test 
of inventiveness as required for a patent, is protected for ten years (renewable for two further 
five-year consecutive terms) from the date of fili ng, subject to use. The latest amendment to the 
Patent Regulations (in force 15 February 2011) involved changes to simplify the registration process through an expedited examination procedur e for patent and encouraging the use of online 
registration and online documentation processing. As of November 2013, the 1983 Act was under 
amendment procedures. As at June 2013, Malaysia had granted 49,042 patents and utility innovations, of which 46,578 were granted to foreign nationals. Patent filings by residents 
increased particularly in the area of semiconductor inventions, illustrating Malaysia's high level of 
integration in global ICT value chains.
186 Malaysia also files patents and utility innovations abroad; 
                                                                                                                                               
at: 
http://www.wipo.int/treaties/en/ShowResults.jsp?co untry_id=124C&start_year=ANY&end_year=ANY&search_
what=C&treaty_all=ALL ). 
180 WTO document IP/C/M/34, 20 December 2001. 
181 MyIPO online information. Viewed at: http://www.myipo.gov.my/web/guest/paten-aspec . 
182 MyIPO (2011). 
183 Abraham and Toh (2012). 
184 MyIPO (2011). 
185 EIU (2012a). 
186 WTO (2012) WT/TPR/S/292 • Malaysia 
 
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  158 patents and utility innovations were granted (in Brunei Darussalam, Singapore, the 
Philippines, Thailand, and Viet Nam) from 2006 to 2010.  
3.122.  Malaysia's compulsory licensing provisions, which are applied to patents, layout designs of 
integrated circuits, and copyrights and related rights, remain unchanged. Malaysia has not 
accepted the Protocol amending the TRIPS Agreem ent to permit use of the Paragraph 6 System, 
nor has it notified implementing legislation for transposing these flexibilities into national law to the TRIPS Council. Compulsory licensing may be granted under Section 49 of the Patents Act 1983 
if registration has not been acted upon within three years. A licence may be obtained on an earlier 
patent if a new patent cannot be worked without it , particularly if the later invention constitutes an 
important technical advance.
187 The Malaysian Government may expropriate a registered patent. 
No compulsory licences or rights of governme nt have been granted since 2005. However, in 
June 2012, the MOH enquired about the status of the Kaletra patent from MyIPO, but there have 
been no requests for compulsory licences for this or any other HIV medication.  
3.123.  Parallel imports are allowed into Malaysia under the Patents Act 1983. The potential for 
parallel imports diminishes sole distributors' exclusive rights to distribute patented products in 
Malaysia. However, they may take action against the contracting parties under the common law regime for loss of revenue. There are no provisions restricting parallel imports that relate to 
copyrights and trade marks in  any laws or regulations.
188  
3.4.6.1.2  Trade marks 3.124.  The Trademark Act 1976 (last amendment in 2002) protects trade marks on goods and 
services for ten years upon registration, rene wable indefinitely for ten–year periods. The 
Trademarks (Amendment) Regulations 2011, which entered into effect on 15 February 2011, 
introduced the expedited examination of an application within four months of the date of filing, and reduced the fees for online filing.
189 A Trademarks Bill 2010, which is to include provisions of 
the Madrid Protocol, was still under review by the Attorney General's Chamber, at draft stage, in 
September 2013. Once passed, the definition of  trade marks will be extended to cover 
non-traditional trademarks such as sounds, smells, tastes, and shapes. The Trade Descriptions 
Act 1972 was replaced by the Trade Descriptions Act 2011 (effective 1 November 2011); as the 
Trademarks Act 1976 contains no penal provisions, the new Trade Descriptions Act enables a registered trade mark owner to enforce the Act's provisions against any infringement, and the validity period of a trade description order was reduced from five years to one year. As at 
June 2013, Malaysia had registered 409,955 trade marks, 188,603 of which belonged to foreign 
right holders.
190  
3.4.6.1.3  Geographical indications 
3.125.  Under the Geographical Indications Act (amended 2001) and Geographical Indications 
Regulation 2001 (amendment 2013), geographical indications (GIs) are granted protection regardless whether they are registered. A registered geographical indication is given ten years of 
protection from the date of filling and is renewable for further periods of ten years.
191 In the case 
of registered geographical indications, only produc ers carrying on their activity in the geographical 
area specified in the Register have the right to use a registered geographical indication in the 
course of trade, even where the true origin of th e goods is indicated or the geographical indication 
is used in translation accompanied by expressions su ch as "kind", "style", "imitation". The scope of 
protection does not differ between GIs for wines and spirits, and those registered for other products. The amendment to the Geographical In dications Regulations entered into force on 
15 July 2013, and involved, inter alia , the introduction of a new GI 1 Form with details of products 
                                               
187 EIU (2012a).  
188 Nevertheless, according to a 2010 Court ruling it seems that although Malaysian laws do not 
expressly forbid parallel importation,  only the registered proprietor of a mark in Malaysia has the right to 
import, sell or otherwise advertise for sale, goods that be ar the registered mark unle ss it can be proven that 
the source of the parallel goods that bear the regi stered mark has a connection or association with the 
registered proprietor in Malaysia ( Mirandah,  "Parallel Import Law Clarified", 10 November 2011. Viewed at: 
http://www.mirandah.com/en/pressroom/articles-list/item/320-parallel-import-law-clarified.html 
[12 June 2013]).  
189 Abraham and Toh (2012). 
190 MyIPO online data. Viewed at: http://www.myipo.gov.my/ web/guest/cap-statistik . 
191 MyIPO online data. Viewed at: http://www.myipo.gov.m y/web/guest/geo-umum . WT/TPR/S/292 • Malaysia 
 
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  specification, qualification and registration of GI agents, as well as provisions relating to renewal 
and restoration of GI registration. In November 2013, Malaysia had registered 22 GIs, of which 5 belonged to foreign products.
192  
3.4.6.1.4  Plant va riety protection 
3.126.  Under the Protection of New Plant Variety (PNPV) Act 2004 (effective and unchanged since 
20 October 2008) and the Protection of New Plant Varieties Regulations 2008, IPR protection of new plant varieties is granted via a registration  approval, based on the validation of plant 
characteristics that distinguish it from other varieties.
193 For a plant variety that is new, distinct, 
uniform, and stable, the term of protection is 20 years or 25 years (for trees and vines/perennial plant) from the filing date of the application. For a plant variety that is bred or discovered and 
developed by a local community or indigenous pe ople, protection of 15 years from the date of 
application may be granted if it is new, distinct, and identifiable. In 2005, Malaysia initiated the 
procedure for and still considers becoming a member of the International Union for the Protection of New Varieties of Plants (UPOV); one of the prerequisites to joint is to have a law that conforms 
to the UPOV Convention.
194 Recently Malaysia's Plant Variety Board decided to review the PNPV 
Act 2004 in order to improve the effectiveness of its implementation, address stakeholder 
concerns, and move towards international harmonization.   
3.4.6.1.5  Industrial designs and layout desi gns of integrated circuits (topographies)  
3.127.  Protection has been updated under the Industrial Designs Act 1996 (amended 2013, in 
force from 1 July 2013), and the Industrial Designs (Amendment) Regulations (amended 2012, in force from 15 February 2012).
195 The amendment to the Act raised the standard of novelty to 
worldwide level; extended the maximum period of registration (i.e. protection) from 15 years to 
25 years196; replaced the Government Gazette  with an Intellectual Property Official Journal ; 
classified industrial design registrations as personal property, capable of being assigned, 
transmitted, and be used as a security interest transaction; and introduced a six-month time limit 
for recording any assignment, transmission, other oper ation of law or security interest transaction. 
The amendments to the Regulations brought minor changes in paper requirements for registration, 
registration fees, and procedures, and for the Registrar. Under the Layout-designs of Integrated 
Circuits Act 2000 a layout-design of an integrated circuit remains protected for 10 years from the date the layout-design is first commercially exploited in Malaysia or elsewhere, and the protection lapses 15 years after the date the layout-design is created, notwithstanding the commercial 
exploitation.
197 In June 2013, Malaysia had registered 17,986 industrial designs, of which 
10,989 belonged to foreign right holders.198 Malaysia also protects its industrial designs abroad; 
in 2010, it had 370 industrial design registrations in 5 ASEAN countries (Brunei Darussalam, the 
Philippines, Singapore, Thailand, and Viet Nam).199  
                                               
192 The domestic protected pr oducts included Bario rice, Borneo virgin coconut oil, Buah Limau Bali 
Sungai Gedung (a type of fruit), Kuih Lidah Kampung Berundong Papar (a type of snack), Langkawi cheese, 
Sabah seaweed, Sabah tea, Sarawak dabai (a fruit), Sarawak litsea (a plant), Sarawak pepper, Sarawak 
layered cake, Sarawak sour eggplant, two types of Sa rawak rice, Tambunan ging er, and Tenom coffee. The 
foreign products included: Cognac (F rance), Parmigiano Reggiano (Italy), Pisco (Peru), and Scotch whisky (UK) 
(MyIPO online data. Viewed at: http://www.myipo.gov.my/ web/guest/geo-statistik) . 
193 Plant Variety Protection Malaysia online information. Viewed at: http://pvpbkkt.doa.gov.my/ ; 
Mirandah,  "The Malaysian New Plant Varieties Act 2004 - A comparative perspective", 24 November 2008. 
Viewed at: http://www.mirandah.com/categories/item/166-the-malaysian-new-plant-varieties-act-2004-a-
comparative-perspective.html  [13 June 2013]; and "Guide To Plant Vari eties Protection In The Asean Region", 
2 November 2010. Viewed at: http://www.mirandah.com/en/categories/item/109-guide-to-plant-varieties-
protection-in-the-asean-region.html  [13 June 2013]. 
194 According to UPOV's comments, a number of provisions of Malaysia's PNPV Act 2004 are not in line 
with the UPOV 1991 law (UPOV document C(Extr.)/22/2, 2 February 2005. Viewed at: http://www.upov.org/edocs/mdocs/upov/en/c_extr/22/c_extr_22_2.pdf ; and UPOV Publication No. 437(EN), 
5 January 2013. Viewed at: http://www.upov.int/export/sites/upov/about/en/pdf/pub437.pdf  [11 June 2013]). 
195 MyIPO online information. Viewed at: http://www.myipo.gov.my/web/guest/reka-akta ; and 
Cheah (2013). 
196 Malaysia seems now on par with the maximum regist ration period for the EU  design registrations, 
and in contrast with Indonesian, Thai, Philippine, an d Singaporean maximum protection terms (Cheah, 2013). 
197 Layout-Designs of Integrated Circuits Act 2000 Act 601. Viewed at: 
http://www.wipo.int/wipolex/en/text.jsp?file_id=128848#P118_10616 ; and MyIPO online information. Viewed 
at: http://www.myipo.gov.my/web/guest/susun-umum . 
198 MyIPO online data. Viewed at: http://www.myipo.gov.my/ web/guest/reka-statistik . 
199 MyIPO (2010). WT/TPR/S/292 • Malaysia 
 
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  3.4.6.1.6  Trade secrets200 
3.128.  Malaysian law in this area remains based on English law and there is no formal registration 
process for trade secrets or confidential information. A breach of confidence is generally actionable in the courts provided the following three conditions are met: the information is confidential; the 
information is disclosed in circumstances importing confidentiality; and there must be actual or 
anticipated unauthorized use or disclosure.
201 Government officials are bound under the Official 
Secrets Act 1972, and MyIPO does not have any information on cases involving trade secrets 
protection. As from 1 March 2011 the MOH has provided data protection for pharmaceuticals 
containing new chemical entities (NCE), for periods of five years and three years for second indication.
202 Protection is provided against unfair commercial use, as well as unauthorized 
disclosure of test or other data generated to obtain marketing approval of pharmaceutical products 
containing NCEs. Protection is granted on the same date as in the country of origin.  
3.4.6.2  Copyright and related rights 3.129.  Although copyright protection remains automatic (i.e. no registration) and works are 
protected immediately upon creation and fulfilment of certain conditions in the Copyright Act 
(original or derivative work, reduced to material form, author a qualified person in Malaysia), on 1 June 2012 Malaysia introduced a new Copyright Voluntary Notification system, where copyright 
owners may deposit their copyright work together with statutory declaration to be recorded in the 
Copyright Register. Extract from the Register serves as prima facie  evidence. Photographs are 
protected under artistic work. The period of protection for literary, musical or artistic works is the life of the author plus 50 years.  
3.130.  During the period under review, copyright protection legislation was modernized and 
strengthened to, inter alia,  bring it into line with undertakings under the WIPO Copyright Treaty 
and WIPO Performances & Phonograms Treaty (section 3.4.6). The Copyright (Amendment) 
Act 2012, in force as from 1 March 2012, introduced statutory damages (from RM 25,000 (around 
US$8,100) to RM 500,000, brought the act up to date with technological changes, introduced more stringent rules for internet service providers to combat online piracy (such as illegal file sharing), 
and strengthened anti-camcorder legislation (to combat the illegal recording of films in 
cinemas).
203 Despite all these significant developments, there seem to be grounds for regulatory 
improvements in certain areas, including coverage of access controls, temporary copy protection, statutory damages, civil damages/innocent infringer, service provider liability, and term of 
protection, as well as considering, inter alia , the adoption of provisions imposing landlord liability 
and mandatory minimum jail sentences for piracy and/or sentencing guidelines to ensure imposition of deterrent sentencing.
204 Under the Copyright (Voluntary Notification) Regulations 
2012, which provides more tangible protection, as from 1 June 2012 copyright owners have been 
able to voluntarily notify and deposit a copy of the work eligible for copyright with MyIPO.205 
                                               
200 Trade secrets, which could be anything from a design, process, modus operandi , formula or even a 
tool, are generally held as confidential information that affords business outfits a competitive edge over their likely rivals; in contrast to patents, which expire afte r some years, trade secrets do not expire with time 
(Mirandah online information. Viewed at: http://www.mirandah.com/privacy-and-trade-secrets.html ). 
201 Article 39 of the TRIPS Agreement requires the prot ection of undisclosed information of commercial 
value and of certain data submitted to governments or govern ment agencies. See 
http://www.wto.org/english/docs_e/legal_e/27-trips_04d_e.htm#7 ; and Malaysian Intellectual Property 
Association online information. Viewed at: http://www.mipa.org.my/confidential-information.html . 
202 The second indication for a registered pharma ceutical product means a single or cluster of 
therapeutic indications applied subsequent to the first indication(s) approved at the point of registration of the said product and contains reports of new clinical investigations other than bioavailability studies. Directive No. 2 Year 2011 issued under regulation 29 of the Control of Drugs and Cosmetics Regulations 1984. 
203 The new Sections 36A and 36B of the 2012 Act: ensure copyright protection for computer programs 
(whatever may be the mode or form of their expression) and compilations of data constituting intellectual 
creations; extend the exclusive rights of authors to distribution, rental, and communication of the works to the public (subject to certain limitation s); and provide legal remedies against the circumvention of technological 
measures used by authors to prevent the removal or al tering of information (Henry  Goh online information, 
"Malaysia Commits to Fuller Copy right Protection". Viewed at: http://www.henrygoh.com/malaysia-law-
practice-malaysia-comm its-to-fuller-copyright-protection.html ; and EIU, 2012a). 
204 International Intellectual Property Alliance (2013) . 
205 Henry Goh online information, "Voluntary  Notification of Copyright". Viewed at: 
http://www.henrygoh.com/malaysia-law-practice-6.html  [14 June 2013]; and MyIPO online information. 
Viewed at: http://www.myipo.gov.my/web/guest/hakcipta-umum . WT/TPR/S/292 • Malaysia 
 
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  Malaysia plans to update its Optical Disc Act to strengthen licensing requirements of CD and DVD 
manufacturers, though by November 2013 no draft amendments had been made public.206  
3.131.  Fines and penalties remain unchanged since 2003 as they are considered an effective 
deterrent. Those for making, selling, hiring, distri buting, possessing (other than for domestic use) 
or importing any infringing works are RM 20,000 per infringing work for a first offence and to 
RM 40,000 per infringing work for subsequent offences.207 Fines for making or possessing any 
equipment used or intended to be used for the purposes of making infringing copies or works are 
RM 40,000 for a first offence and up to RM 80,000 for subsequent offences. Offenders can be 
arrested without a warrant, and the term of imprisonment for circumventing any effective technological measures pertaining to rights-management information is five years for a first offence and ten years for subsequent offences.  
3.4.6.3  Enforcement 
3.132.  Malaysia takes a proactive approach to enforcement. During the period under review, it 
improved its effective protection of IPR as the MDTCC enhanced the enforcement regime, which 
included active cooperation with rights holders on matters of IPR enforcement, on-going training of 
prosecutors for specialized IPR courts, and the re-establishment of the Special Anti-Piracy Task Force (SAPTF) in the fourth quarter of 2013.
208 Nevertheless issues remain, including the relatively 
widespread availability of pirated and counterfeit products, high rates of piracy over the Internet, 
and continued problems with book piracy.209 The MDTCC plans to take action in cooperation with 
book publishers in Malaysia to outline an effective solution against book piracy especially the existing enforcement barriers; in addition, the SATPF is expected to contribute to the fight against 
book and digital piracy. 
3.133.  Customs officers have an ex officio  duty under the Act to detain or suspend the release of 
goods that are deemed to be infringing IPRs on copyrights and trade marks on the basis of prima 
facie evidence. Nevertheless, concerns remain regarding border enforcement, in particular with 
respect to transhipment as Malaysia is considered as one of the significant East Asian departure points for counterfeit goods.
210 No information on transhipment of counterfeit goods (main 
categories of seized import/export items and values/origin concerned) and action taken so far was 
available from the authorities.  
3.134.  The MDTCC has investigated pirated software in various organizations in Malaysia, the only 
ASEAN member with an official (2,145-person) enforcement squad to investigate complaints from 
private businesses.211 Actions taken against domestic producers and distributors include warning 
letters, inspections, charging offenders in courts, seizures, arrests, sealing facilities, and working 
with management/owner to suspend tenancy.  Between 2009 and 2012, the overall number of 
raids and inspections dropped, particularly in 2011 when action in night markets declined 
considerably (Table 3.5) as local authorities committed themselves to running the inspection and refuse licences for selling infringing items as night markets fall under their respective jurisdiction. 
Nevertheless, action intensified strongly in eateries and computer shops. During the same period, 
the value of seized copyright-infringing goods dr opped by almost 50%, while that of counterfeit 
goods grew four-fold. These involved copyright-infr inging seizures CD/DVD/Blu-ray for film, music, 
and computer and entertainment software, as well as three counterfeit categories: food/health 
                                               
206 According to industry groups, Malaysia remains a source for pirated compact discs (CDs) and digital 
video discs (DVDs). In recent years, trade organization s from the United States and the EU have repeatedly 
asked for amendments to the Optical Disc Act to ensure that the inspection authority covers all locations where optical media production may occur and to includ e as offences such acts as tampering with 
source-identification codes and burning of recordable di scs (EIU, 2012a; and International Intellectual Property 
Alliance, 2013).  
207 For example, if the offender is found guilty of possessing one MP3 infringing an album carrying 
1,000 songs, the amount of penalty will be calculated for each infringing work, i.e. 1,000 songs x RM 20,000 (EIU, 2012a)  
208 In recognition of its efforts with respect to IP R protection and enforcement, in particular the 
Copyright (Amendment) Act 2012 (section 3.4.6.2), Malaysia was removed from the U.S. Trade Representative Special 301 Watch List of IPR offenders in April 2012; Malaysia was listed in 1989 and 1990, as well as for the entire period 2000-11 (Knowledge Ecology International online information, "The USTR Special 301 Reports, 1989 to 2012". Viewed at: http://keionline.org/ustr/special301  [14 June 2013]). 
209 USTR (2013); and International Inte llectual Property Alliance (2013). 
210 USTR (2012b); and U.N. Office on Drugs and Crime (2013). 
211 EIU (2012a). WT/TPR/S/292 • Malaysia 
 
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  (cosmetics, liquor, drugs, etc.); safety (electrical, communications, vehicle spare parts); and 
others (clothing, watches, stationeries, etc.).   
Table 3.5 Raids and inspections relate d to copyright infringement, 2009-12 
Premises raided/inspected 2009 2010 2011 2012 
Night markets 70,325 48,121 23,098 33,414 
Eateries 7,385 7,395 4,620 8,392 
Traders on five footways 6,891 5,743 8,259 7,861 
Lobby stalls at shopping complex 5,043 6,902 2,868 7,518 
Sale/rental optical disc shops 4,923 8,222 4,374 9,359 
Optical disc manufacturers 126 144 154 237 
Stores/distribution centres 10,173 10,590 1,318 2,926 
Computer shops 680 1,826 1,687 4,059 
Others 7,379 3,220 3,439 18,027 
Total 112,925 92,163 49,817 91,793 
Seizures under the Copyright Act, and 
Trade Description Act, 2005-07 (RM million) 
Copyright infringement 33.53 22.43 16.48 16.91 
Counterfeit goods 3.57 13.78 12.74 14.54 
Source: Information provided by the Malaysian authorities. 
3.135.  On 20 October 2011, the MDTCC launched a voluntary Basket of Brands (BOB) scheme to 
protect companies against the sale of counterfeit goods.212 Under this scheme trade mark 
right-holders receive more proactive protection efforts in exchange for a commitment to testify in 
any resulting prosecutions. As of September 2013, there were 29 brand owners of 212 brands 
from a broad spectrum of industries, including global clothing, sportswear, liquor, car parts, and pharmaceutical brands; 7 were local brands and 205 international. They are given priority to follow 
up and verify the seizures of counterfeit good s. The BOB scheme also aims to enhance the 
awareness of university students by encouraging them to become anti-piracy friends and 
intermediaries between institutions of higher learning and the MDTCC, through providing information, comments, and suggestions for curbing piracy and counterfeiting. 
3.136.  Software and optical-disc piracy have been the main focus of enforcement actions in recent 
years. Nevertheless, despite a May 2006 deadline for businesses to validate their software or risk enforcement raids, 78% (2011) of computer users admitted using pirated software.
213 The rate of 
software piracy was estimated at 55% in 2011, down by 1 percentage point from 2010 and below 
the average software-piracy rate of 60% for th e Asia/Pacific region. However, losses due to 
software piracy totalled an estimated US$657 million in 2011, up from US$606 million in 2010. In 2011, Malaysia ranked 26
th in the world for the number of connections by peers participating in 
the unauthorized file sharing of select ESA member titles on public P2P networks.214 MDTCC 
through its Enforcement Division worked closel y with the right holders to examine and raid 
licensed optical-disc-replicating factories engaged in the production of infringing DVDs containing 
movies and entertainment software files, se izing thousands of infringing DVDs. Over 
430,000 pirate DVDs, burned and replicated, and close to 20,000 counterfeit Blu-ray Discs, were seized in 2011.
215 Investigations were carried out in corporations and around 70 were taken to 
court in 2011 (40 in 2010). From 2006 to 2011 there have been 63 interdictions on illegal 
camcording.  
3.137.  The Intellectual Property (IP) Court, established on 17 July 2007, was to comprise 
15 session courts located in all states; however, by April 2012 courts had been established only in 
3 states (Kuala Lumpur, Penang, and Johor), and over 175 cases were still pending at 
end-2011.216 On 11 March 2010, the MDTCC reactivated and expanded the jurisdiction of the 
                                               
212 Abraham and Toh (2012); and USTR (2012a).  
213 During the so-called Sikap Tulen campaign, an  unspecified amount of hardware, and around 
RM 8.2 million worth of unlicensed software was seized from 70 companies in 2011 (Business Software Alliance, 2012; Business Software Alliance Press Release, "BSA Report finds 78 percent of computer users in Malaysia admit they pirate software", 15 May 2012. Viewed at: http://portal.bsa.org/globalpiracy2011/downloads/press/pr_malaysia_en.pdf ; and EIU, 2012a).  
214 International Intellectual Property Alliance (2012). 
215 International Intellectual Property Alliance (2012). 
216 EIU (2012a). WT/TPR/S/292 • Malaysia 
 
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  Copyright Tribunal, which was introduced in 1999 and ceased in 2003 as no case had been 
recorded since its establishment, in order to o ffer the users and copyright owners an alternative 
platform, with simpler, cheaper, and faster procedures, rather than the strict procedures of the IP court; the Copyright (Copyright Tribunal) Regulations 2012, setting its operating procedures, 
entered in force on 1 September 2012 but no case has been filed so far.
217  
 
                                               
217 UNESCO online information. Viewed at: http://portal.unesco.or g/culture/en/ev.php-
URL_ID=40730&URL_DO=DO_TOPIC&URL_SECTION=201.html ; and Copyright (Copyright Tribunal) 
Regulations 2012 (P.U.[A]212/2012), 28 June 2012. Viewed at: 
http://www.myipo.gov.my/documents/10192/105238/pua_20120713_COPYRIGHT.pdf . WT/TPR/S/292 • Malaysia 
 
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  4  TRADE POLICIES BY SECTOR 
4.1  Introduction  4.1.  During the period under review, Malaysia maintained its dualistic approach to protection of 
goods. Relatively low agricultural protection contrasts with higher levels of protection in 
manufacturing, although the latter was increasingly subject to RTA-driven trade liberalization 
during the review period. While most sectoral policies remained relatively unchanged, emphasis was placed on refocusing agricultural and energy  policies and implementing new measures in the 
automotive sector. Malaysia has continued to pursue autonomous services sector liberalization and 
has undertaken a major reform of financial services legislation. 
4.2.  The contribution of agriculture (including fo restry and fisheries) remains at around one tenth 
of GDP. Continuous adoption of new technologies has enhanced its total factor productivity (TFP) 
growth while the self-sufficiency ratio for major agricultural products remained largely stable 
during the review period. The Government's new ag ricultural policy supports the development of 
the agri-food industry with emphasis on, inter alia , promoting biotechnology as well as high value 
agriculture as a driver of future growth. Malaysia's trade regime for agriculture remains relatively 
liberal with generally low MFN applied tariffs averaging 2.9% (WTO definition) in 2013. However, non-ad valorem  tariff rates maintained almost exclusively on certain agricultural products continue 
to allow for higher tariff protection (AVEs are as high as 1,439.2%). Tariff-rate quotas remain in 
place. The Government also implements measures to support the domestic processing of certain agricultural products (e.g. through non-automatic export licensing and export duties) as well as to promote exports (e.g. through tax exemptions on statutory income from exports); export duties 
on crude palm oil were reduced considerably to improve export competitiveness and reduce 
domestic stocks. Malaysia continues to provide increasing amounts of product-specific support (i.e. price support to paddy rice) and general support (e.g. fertilizer subsidies, and soft loans) 
mainly focused on rice-related activities. Rice, a strategic crop for which the authorities revised 
their approach by ensuring availability, accessibili ty, and affordability rather than self-sufficiency, 
remains the sole item subject to the import monopoly of the firm Padiberas Nasional Berhad 
(BERNAS), in addition to non-automatic import /export licensing, and price and supply controls. 
Fish production targets have been largely exc eeded despite the use of precautionary measures, 
such as the limitation on licences issued; a fisheries input control regime and certain resource enhancement and environmental sustainability measures are in place. Domestic support for 
fisheries has included additional diesel fuel subsidies (until end-May 2011 for trawlers above 
70 GRT). 
4.3.  The contribution of mining (including fuel s) and quarrying to GDP dropped slightly to 10.4% 
in 2012. Mining products remain subject to relatively high tariff protection ranging from zero 
to 50% (portland cement), export licensing, and export taxes, thereby assisting downstream processing.  
4.4.  During the period under review, efforts have  been made to reduce Malaysia's dependence on 
oil and gas and to cope with rising energy de mand by increasing the share of other sources 
including those generated from renewable sources in the total primary energy supply. However in spite of these efforts, the contribution of renewable energy remains negligible. Some action was 
also taken to improve energy efficiency. Energy subsidization for all consumers remains a major 
and long-standing fiscal, budgetary, developmental,  environmental, and thereby political issue. 
A 2010 Subsidy Rationalization Programme was re-activated in 2013. State involvement in the oil, 
gas and electricity sectors persists with government-linked company PETRONAS remaining the 
biggest contributor to the government budget. It allows, inter alia,  for subsidization of power 
generators through a government-imposed low natural gas price, a pass-through element that is 
intended to benefit the end users. Furthermore, electricity tariffs differ depending on the category 
of user and their consumption, thus allowing for cross-subsidization among different consumer groups; for example, average tariffs for commercial and agricultural activities are higher than those charged to industrial and residential consumers.  
4.5.  Whereas manufacturing's share of GDP ha s decreased slightly since 2010, its share of 
employment remains relatively stable. Manufacturing ranks 3
rd behind construction and services in 
terms of TFP growth. Manufacturing, with the no table exception of the automotive industry, 
remains relatively open to trade and foreign investment. Since 2009, Malaysia's average applied 
MFN tariff on imports of industrial products has dropped from 8% to 6.2% (2013), which is more WT/TPR/S/292 • Malaysia 
 
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  than two times higher than the average tariff affecting agricultural products (WTO definition), due 
to nomenclature changes. Preferential treatm ent for locally produced goods in government 
procurement contracts continues to support ethnic Malay ( bumiputera)  manufacturers. Exports of 
manufactured products are assisted through, inter alia , tax exemptions on statutory income from 
exports (enhanced for majority Malay-owned firms and automotive), as well as export licensing 
and export taxes on principal commodities. Several tax and non-tax incentives support, inter alia,  
R&D and SME activities. The automotive sector remains protected by an average applied MFN tariff 
of 17.3%, the highest of all HS sections, although tariffs on imports from ASEAN member 
countries were reduced to zero in 2010. Non-tariff measures such as the gazetted price system and the import licensing system of "approved permits"  remain in place. In addition, an array of tax 
measures (high excise duties affecting disproportionately large vehicles and enhanced tax 
exemptions on statutory income from exports) and non-tax measures (soft loans and grants) 
within the framework of the National Automotive Policy continue to be in use.  
4.6.  The Malaysian services sector continues to  be very dynamic, with annual growth averaging 
5.9% over the review period. In 2012, the sector accounted for just over 50% of GDP and 
employment, and attracted the largest share of  approved investments. The Government has 
continued to autonomously liberalize foreign equity restrictions in a swathe of services sectors; 
in 2012, it commenced implementation of partial or complete lifting of foreign equity restrictions in 
17 services subsectors, under 6 sectors: professional services; communications services; distribution services; educational services; environmental services; and health related and social services. Most of these subsectors have been earmarked by the Government as National Key 
Economic Areas, which are considered to have the greatest potential for generating economic 
growth in the economy. Malaysia has undertaken services commitments in almost all of the RTAs to which it is a party; and coverage goes well beyond Malaysia's commitments under the GATS. 
4.7.  Over the review period Malaysia has undertaken comprehensive modernization and 
streamlining of its financial services legislation. New laws have removed the caps on foreign direct investment in the banking and insurance sectors.  Instead, the issuing of insurance and banking 
licences is now based on prudential and the "best interest of Malaysia" criteria. Malaysia is seeking 
to promote itself as a centre for Islamic finance, health care, and education services, as well as a transportation hub for both air transport and shipping. It is promoting these sectors through liberalization efforts and various incentives. Government participation in certain services sector 
remains significant. For example, the Government is a majority shareholder in Telekom Malaysia, 
which has 95% of the fixed-lined telecommunications market; Malaysia Airports Holdings Berhad, a government-linked company (GLC) manages all but one of the country's airports; the Malaysia 
International Shipping Company (MISC), also a GLC, accounts for 10% of Malaysia's total 
seaborne trade (dry and liquid bulk), and government-owned development financial institutions (DFIs) account for 5.6% of the financial system's total assets (and around 10% of the banking 
system's total assets). 
4.2  Agriculture and livestock 4.2.1  Features 4.8.  The contribution of agriculture (including forestry and fisheries) to GDP ranged from 9.2% 
in 2009 to 11.8% in 2011, while its share in total employment dropped steadily from 11.9% 
to 11.1% (Table 1.2). According to the Malaysia Productivity Corporation, the sector recorded average TFP growth of 0.37% during 2008-12, whil e labour productivity shrunk by an average 
of 0.14% and capital grew by 2.3%.
1 Continuous adoption of new technologies such as 
biotechnology, better farm management, better agronomic practices, integrated farming, and farm mechanization through the implementation of Entr y Point Projects (EPPs) (section 4.2.2) has 
enhanced TFP growth in the sector. In 2012, the sector had the second-lowest labour productivity 
rate in the economy (after construction). Between 2008 and 2011, farmland increased from 
                                               
1 Following a period of steadily rising labour productivity (by an overall 20.9% in 2009-11) due to the 
implementation of EPPs (sec tion 4.2.2), the sector registered negati ve labour productivity growth of 13.9% 
in 2012, from RM 38,510 in 2011 to RM 33,172 in 2012, as a result of lower output and prices in the plantation industry, particularly for oil palm fruit (seemingly due to bearish market sent iments resulting from the 
unresolved Euro-zone financial crisis th at led to poor demand for oils and fats), coupled with the sharp rise 
(of 17.1%) in employment as a result of the lifting of the freeze on  the intake of foreign workers, which 
accounts for around 20% (10.8% in 2011) of total agri culture employment (Malaysia Productivity Corporation,  
2013b; and Department of Statistics, 2012d). WT/TPR/S/292 • Malaysia 
 
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  6.8 million ha, to 7.1 million ha; nevertheless, du e to the process of urbanization, farmland for 
rubber (8.7% of total agriculture output in 2012) , coconut, and fruits declined by 18.9%, 2.7%, 
and 9.1% respectively.2  
4.9.  In 2012, Malaysia was the world's second-largest oil palm fruit and palm oil producer (after 
Indonesia). Production of crude palm oil, the country's leading agricultural export (12.5% of total 
exports in 2012), contributed 35.7% (37% in 2011) to total agricultural value-added/output in 2012.
3 Other agricultural products including padd y rice, fruits, vegetables, coconut, tobacco, 
tea, flowers, pepper, cocoa, and pineapple cont ribution of 18.2% to GDP, and livestock 11.7%. 
During the period under review, the sector's trade balance remained positive (RM 33.5 billion in 2012). Government-linked companies (section 3.4.3) like Boustead Holdings BHD and Sime Darby BHD (42.9% of total sector's assets) remain major stakeholders in agriculture and 
plantations.
4  
4.2.2  Government policy 4.10.  The ten-year National Agro-Food Policy 2011-2020, which replaced the Third National 
Agricultural Policy (1998-2010), supports the development of the agri-food industry
5, focused on 
the paddy rice and rice industry, fisheries, livestock, vegetables, and fruits, as well as agri-tourism.
6 The policy aims at ensuring sufficient and safe food supply, making agri-food a 
viable and sustainable industry, and increasing th e income of agricultural entrepreneurs. It is 
expected to further enhance value added in the agri-food sector, the food supply chain, and the 
education of skilled labour. Food security remains an important objective under the policy, although no self-sufficiency targets are set. Th e self-sufficiency ratio for major agricultural 
products remained largely stable during the review period, while an increase of self-sufficiency in 
fruit production is possibly due to the use of hi gher quality plant strains and biotechnological 
investments (Table 4.1). Under the 10
th Malaysia Plan (2011-2015) (section 2.3), the authorities 
revised their approach by ensuring the availab ility, accessibility, and affordability of food, 
particularly rice, to the general public, rather than through self-sufficiency targets set in previous plans.
7  
Table 4.1 Self-sufficiency ratios, 2009-12  
(%) 
 2009 2010 2011 2012 
Crops      
Rice 70.4 71.4 73.0 73.5 
Vegetables 39.2 41.2 58.0 53.3 
Fruits 64.7 65.8 60.1 60.5 
Livestock      
Beef 27.0 28.6 29.5 30.1 
Mutton 10.3 10.6 11.5 12.6 
Poultry 122.2 127.9 131.4 131.4 
Pork 96.9 101.7 99.3 99.2 
Poultry eggs 114.7 115.4 130.6 131.6 
Milk 4.9 4.9 5.1 5.2 
Fish 100.1 101.7 123.7 134.2 
Source: Data provided by the Malaysian authorities. 
                                               
2 Department of Statistics (2012d). 
3 UNSD Comtrade database; and Ma laysia Productivity Corporation  (2013b). 
4 Menon and Ng (2013).  
5 The agri-food system refers to a combination of inst itutions, activities, and ente rprises that collectively 
develop and deliver material inputs to the farming sector, produce primary commodities, and subsequently 
handle, process, transport, market, and distribute food and other agri-b ased products to consumers (Caiazza 
and Tiziana, 2012). 
6 Ministry Agriculture and Agro-based Industry onli ne presentation, "National Agrofood Policy (NAP) 
2011-2020", February 2012. Viewed at: http://www.akademisains.gov.my/download/workshop/obesity/paper8.pdf ; New Straits Times,  "National 
Agrofood Policy launched", 14 January 2012. Viewed at: http://www.nst.com.my/top-news/national-agrofood-
policy-launched-1.32237 ; Ministry of Agriculture and Agro-Based Industry (2011).  
7 USDA Foreign Agricultural Service (2013).  WT/TPR/S/292 • Malaysia 
 
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  4.11.  Under the 2010 Economic Transformation Program (ETP)8 the main goal of the Agriculture 
National Key Economic Areas (NKEAs) is also to shift the industry from an agriculture-centred focus towards agri-business.
9 Its transformation strategy covers four key themes: capitalizing on 
competitive advantages; tapping premium markets;  aligning food security objectives with 
increasing GNI; and participation in the regional agriculture value chain. Under the ETP, a number 
of EPPs have been identified as the high impa ct industries that can drive the growth of the 
agriculture sector. These include 9 EPPs under the Palm Oil and Rubber NKEA and 16 under the 
Agriculture NKEA (herbs, food crops, livestock, and fisheries).10  
4.12.  Strong governmental support has been provided through R&D as well as extension and 
marketing services to help transform the rural and poverty-afflicted agriculture sector into one that is modern, market-oriented, and commercially viable, yielding high returns (sections 4.2.3 
and 4.2.4). The sector's institutional framework has remained unchanged during the period of 
review. It comprises the Ministry of Agriculture an d Agro-Based Industry (for crops, livestock, and 
fisheries), the Ministry of Plantation Industries  and Commodities (for plantations and commodity 
subsectors such as pepper, cocoa, palm, oil, rubbe r, timber, and tobacco) and the Ministry of Rural 
and Regional Development (charged with increasing rural incomes). Special committees, comprising representatives from relevant ministries, including the Economic Planning Unit (EPU), 
ensure coordination between these ministries.  
4.13.  Malaysia continues to promote biotechno logy as another driver of future growth 
(section 4.2.4 and 4.5). Since 2005, BiotechCorp, an agency under the purview of Ministry of 
Science, Technology and Innovation (MOSTI), ow ned by the Minister of Finance Incorporated 
(section 3.4.3) and Federal Lands Commissioner, and governed by the Biotechnology 
Implementation Council, has implemented the object ives of the National Biotechnology Policy, and 
has acted to identify value propositions in both  R&D and commerce and to support these ventures 
via financial assistance and developmental services.
11 BiotechCorp's key mandates are to: act as a 
one-stop-centre; nurture and accelerate growth of Malaysian biotechnology companies; actively promote foreign direct investments in biotechnology; and create conducive environment for 
biotechnology. 
4.2.3  Border measures 4.14.  Malaysia continues to maintain a relatively liberal trade regime for agricultural products. Its 
generally low MFN applied tariffs on agricultural imports averaged 2.9% (WTO definition) 
in 2012/13, compared with 2.8% in 2009 (Tables 3.1 and A3.1). This minor increase is due to the 
tariff nomenclature change (section 3.2.2) that grouped (i.e., reduced) the number of duty-free 
lines for certain items (e.g. sugar and confectionery and dairy products). Non- ad valorem  tariff 
rates maintained almost exclusively on agricultural products (79 out of 83 nine-digit HS tariff lines) 
continue to allow for higher tariff protection (AVEs are as high as 1,439.2%) mainly for alcoholic beverages, tobacco articles, refuse, and certain edible fruits (section 3.2.2.1). Malaysia continued 
to apply tariff-rate quotas, apparently to allow a "reasonable" time for the development of the 
industry.
12 Some quotas were filled while others were not taken up (section 3.2.2.3, Table A4.1). 
The peak ad valorem  rate of 90% remains in place on round cabbage, which is also subject to 
tariff-rate quotas (TRQs) (zero in-quota rate), and non-automatic import licensing requirements 
(sections 3.2.2.3 and 3.2.3.1). In 2011, the TRQ for this item was filled at almost 92% 
(Table A4.1).  
4.15.  A wide range of agricultural products are subject to import licensing and SPS measures 
(e.g. livestock products). Halal certification requirements have been in place since the previous 
TPR, and mandatory labelling of food and food ingredients obtained through modern 
biotechnology, which were gazetted on 8 July 2010, will be implemented from 8 July 2014 
(sections 3.2.3.1, 3.2.5.1, 3.2.5.3, and 4.2.4); these requirements apply to both domestic and 
imported products. Rice is the sole item still su bject to the exclusive import rights of the state-
                                               
8 The Economic Transformation Program is an initiative to turn Malaysia into a high income economy by 
the year of 2020 (section 2.3). It is managed by the Performance Management and Delivery Unit (PEMANDU), an agency under the Prime Minister Department of Malaysia. 
9 PM Department/Performance Management and Delivery Unit (2012a); and PM 
Department/Performance Management and Deliver y Unit (2012b), "Chapter 15: Agriculture". 
10 Malaysia Productivity Corporation  (2013b).  
11 BiotechCorp online information. Viewed at: http://www.biotechcorp.com.my/ . 
12 WTO document WT/TPR/S/225/Rev.1, 15 February 2010. WT/TPR/S/292 • Malaysia 
 
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  trading firm Padiberas Nasional Berhad (BERNAS), which practically limits rice imports to 30% of 
Malaysia's domestic rice consumption depending on domestic supply and demand (section 3.2.7 and 4.2.5). During the period under review, no special safeguard provisions were applied under the WTO Agreement on Agriculture.
13 
4.16.  Malaysia continues to support domestic processing and promote the export of certain 
agricultural products.14 Numerous agricultural commodities remain subject to non-automatic 
export licensing and export duties (sections 3.3. 2 and 3.3.3). Processed palm oil is fully exempt 
from export duties, while crude palm oil is subject to various levels of export duties scaled on 
market price thresholds. As of 2013, export duties on crude palm oil were cut considerably to improve its export competitiveness and reduce domestic stocks. Exporters of fresh and dried fruits, fresh and dried flowers, and ornamental plants receive a tax exemption on their statutory 
income equivalent to 10% of the value of increased exports (section 3.3.5). 
4.2.4  Domestic support 4.17.  During the period under review, Malaysia continued to provide increasing amounts of 
product-specific and general support to agriculture; the former in the form of increased price 
support to paddy rice, and the latter through, inter alia,  rising fertilizer subsidies, and soft loans 
(sections 3.4.2.2 and 4.2.5, Table 4.2).
15 In 2011, price support remained the largest part of 
support expenditure, followed by the fertilizer subsidy. Spending on drainage and irrigation 
facilities has dropped since 2009. In 2013, RM 5.8 billion (RM 2.3 billion in 2012)16 of budgetary 
outlays were given to the Ministry of Agriculture and Agro-  Based Industry to cover, inter alia,  
agricultural development programmes (section 3.4.2.2).17 Of this amount, RM 2.2 billion went to 
assist farmers in reducing production costs as: subsidies and incentives for paddy rice production, 
including subsidies on the paddy rice price to  farmers (RM 480 million) and paddy fertilizers 
(RM 465 million); incentives to increase the paddy yield (RM 80 million) and paddy production 
(RM 563 million); and subsidies on the consumer price of rice (RM 528 million) and high-quality 
paddy rice seeds (RM 85 million). In addition, Malaysia maintains retail price and supply controls, inter alia,  on: sugar, wheat flour, and cooking oil, (section 3.4.4.2). Retail prices of rice, wheat 
flour, and cooking oil are subsidized. To, inter alia , address the excessive sugar intake by 
consumers (i.e. for health reasons), the Government reduced the subsidy on sugar by RM 0.20 per kg, effective 29 September 2012, and abolished it on 26 October 2013, although it is still subject to price controls (section 3.4.4.2); sugar subsidized at RM 0.34 per kg involved an 
expenditure of RM 478 million in 2012. To maintain the increasing price differential and 
consumption quota on cooking oil, the Government provided an allocation of RM 1.5 billion to stabilize the prices of cooking oil in the market in 2013.  
4.18.  Under the 2014 Budget, the Government is to allocate RM 2.4 billion for subsidies and 
incentives, including subsidies for fertilizers, seeds, price of paddy and rice, as well as incentives 
                                               
13 WTO documents G/AG/N/MYS/28, 28 March 2012 and G/AG/N/MYS/27, 16 March 2010. 
14 Malaysia indicated that no export subsidy prog rammes subject to reduct ion commitments were in 
place in 2010 and 2011 (WTO documents G/AG/N/MYS/29, 28 March 2012 and G/AG/N/MYS/26, 16 March 2010). 
15 Soft loans are available in the form of: 3F (Fund  for Food), small and medi um industries fund, and 
various other schemes. Loan facilities are also given to livestock breeders th rough Agro Bank with an allocation 
of RM 55 million, allowing them to make a loan of up to RM 300,000 without a guarantor ( New Straits Times,  
"National Agrofood Policy launched", 14 January 2012. Viewed at: http://www.nst.com.my/top-news/national-
agrofood-policy-launched-1.32237 ; and WTO document WT/TPR/S/225/Rev.1, 15 February 2010). 
16 In 2012, a total of RM 2.3 billion was spent on subsidies (RM 1.5 billion) and incentives 
(RM 854 million) to help farmers, fishermen, and livestock entrepreneurs to achieve food self-sufficiency and improve productivity in the food sector as well as stabilize prices of essential food items ( The Star,  "Economic 
Report 2012/2013: Subsidies to hit RM42.4b in 2012, decline in 2013", 28 September 2012. Viewed at: http://biz.thestar.com.my/news/story.asp?file=/2012/9/28/business/20120928164242&sec=business  
[5 March 2013]). 
17 The 2013 Budget Speech . Viewed at: 
http://www.pmo.gov.my/dokumenattached/bajet2013/SPEECH_BUDGET_2013_28092012_E.pdf 
[5 March 2013]; and The Star,  "Economic Report 2012/2013: Subsidies to hit RM42.4b in 2012, decline 
in 2013", 28 September 2012. Viewed at: 
http://biz.thestar.com.my/news/story.asp?file=/2012/9/28/business/20120928164242&sec=business  
[5 March 2013]. WT/TPR/S/292 • Malaysia 
 
- 87 - 
 
  for higher production of paddy and fish landing18; in addition, RM 243 million is to be allocated for 
the rubber, palm oil, and cocoa replanting programme and forest plantation programme. To increase productivity as well as to promote agri culture produce with high demand, RM 634 million 
is to be allocated under the NKEA initiative for projects including paddy and fish cage farming, 
seaweed and birds' nest, high-val ue herbs, vegetables, and fruits for the export market. Under a 
Bioeconomy Community Development programme, idle land will be developed through the application of biotechnology as well as for contract farming to increase the value-added of the 
agri-based industry and income of farmers.
19 I n  a d d i t i o n  t o  e x i s t i n g  B i o N e x u s  S t a t u s  t a x  a n d  
non-tax incentives,20 the Government will also provide R&D incentives for viable projects, which 
will be assessed by BiotechCorp from 1 January 2014 to 31 December 2018 (section 4.2.2): tax deduction for companies that invest to acquire technology platform in bio-based industry; 
exemption on import duty on R&D equipment for companies that invest in pilot plants for the 
purpose of pre-commercialization in Malaysia; and a special incentive to companies to partially cover the operational cost for human capital deve lopment for the Centre of Excellence for R&D. 
Table 4.2 Overview of domestic agri cultural support measures, 2009-11 
(RM million) 
Type of measures Description Value 
2009 2010 2011 
Drainage and 
irrigation facilities General services that benefit rural and 
smallholding farmers 722.17 399.01 363.51 
Research and 
development General services provided for most crops and 
agricultural programmes  13.54 14.57 19.24 
Marketing services General services provided for marketing of 
produce of smallholders 16.15 6.35 0.8 
Extension services  General services that benefit rural and 
smallholding farmers, including pesticide 
inspection services and transfer of information 
and results of R&D to producers 6.56 12.94 1.09 
Price support and 
guaranteed minimum price Guaranteed minimum pr ice and paddy price 
subsidy provided to paddy farmers in the context of poverty redu ction and uplift of the 
socio-economic wellbeing of paddy farmers 448 448 480 
Fertilizer subsidy Aimed at increasing productivity and 
encouraging good agricult ural practices amongst 
smallholders 275.06 275.06 409.06 
Source: Information provided by the Malaysian authorities. 
4.2.5  Rice 
4.19.  A strategic crop, rice has always been accorded special border treatment and domestic 
support. Malaysia considers that as the staple food for the entire population, an acceptable level of 
self-sufficiency of not less than 70% for rice has to be maintained (2011-2020) (Table 4.1) and 
reviewed accordingly.21 This policy ensures that the country  is not too dependent on external 
sources and that consumers are protected from drastic price surges in the world market. Between 2008 and 2011, paddy production rose 12.2% (2.66 million tonnes); in 2011, Malaysia 
was ASEAN's 8
th paddy producer.22 Under the NKEA initiatives, BERNAS (sections 3.2.7 and 4.2.2) 
has been given new responsibilities to support the development of new paddy fields in East Malaysia and integration of small farms into large-scale farming in Peninsular Malaysia. For 2010 
and 2011 BERNAS purchased 12.7% of national pr oduction and its domestic sales covered 56.4% 
                                               
18 The 2014 Budget Speech  introducing the Supply Bill (2014), "Strengthening economic resilience, 
accelerating transformation and fulfilling promises", 25 October 2013. Viewed at: http://www.fmm.org.my/upload/speech.pdf .  
19 The 2014 Budget Speech  introducing the Supply Bill (2014), "Strengthening economic resilience, 
accelerating transformation and fulfilling promises", 25 October 2013. Viewed at: http://www.fmm.org.my/upload/speech.pdf .  
20 This status, awarded to qualif ied companies undertaking value-added biotechnology and/or life 
sciences activities, confers fiscal incentives, grants, and other guarantees. Apart fro m the overall benefits and 
support, BioNexus companies are assured a list of privileges as stipulated in the BioNexus Bill of Guarantees 
(BiotechCorp online information. Viewed at: http://www.biotechcorp.com.my/bionexus-new/ ). 
21 Chee-Wan and Meng-Chang (2012).  
22 Department of Statistics (2012a).  WT/TPR/S/292 • Malaysia 
 
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  of national consumption in volume terms; its annual imports averaged 995,000 tonnes 
(2010-12).23  
4.20.  Rice remains subject to a relatively high but apparently non-applicable tariff rate of 40% 
(except for broken rice for animal feed, which is subject to a 15% rate), as imports are duty free 
until 2015, as well as non-automatic import/export licensing and BERNAS' state-trading operations 
(sections 3.2.3.1, 3.2.7, and 3.3.2). In 2013, six ty pes of subsidies and incentives were in place: 
Paddy production Incentive (RM 563 million); Pric e of Rice Subsidy (RM 528 million); Paddy Price 
Subsidy (RM 480 million), Paddy Fertilizer Subs idy (RM 465 million), Certified Paddy Seed 
Incentive (RM 85 million), and Yield Increment Incentive (RM 80 million).24 Under the guaranteed 
minimum price (GMP) scheme, BERNAS undertakes to buy paddy rice from farmers at not less than the GMP if the market price is lower than the GMP. Currently the GMP is RM 750 per tonne 
(same as in 2009) for both long and medium grains. Under the paddy rice price subsidy 
programme, the Government makes payments (currently RM  248.10 per tonne (same as  in 2009)) 
to farmers for the paddy rice they sell to any commercial rice mill. This subsidy, the major 
component of overall agricultural support expenditur e (Table 4.2, sections 3.4.2.2 and 4.2.4), is in 
addition to the price received for the paddy. The Government also maintains price and supply controls for certain types of rice consumed by the lower income population, i.e. lower grade rice 
has price ceilings (section 3.4.4.2). BERNAS also main tains the national rice stockpile on behalf of 
the Government at 292,000 tonnes. BERNAS's exclusive right to import rice was extended until 2021, and as a monopsony buyer, it tends to have the market power to negotiate lower prices with its suppliers. When importing rice, according to the authorities, BERNAS implements a 
transparent purchasing system with open tendering procedures. BERNAS does not regulate the 
retail prices for rice; these are regulated by the Co ntrol of Paddy & Rice Section under the Ministry 
of Agriculture and Agro-based Industry.  
4.3  Fisheries 
4.21.  Malaysia remains a major producer of fish pr oducts although fish production peaked in 2010 
and declined in 2011 (to 1.37 million tonnes fish landings, 122,219 tonnes fresh water 
aquaculture, 404,289 tonnes marine aquaculture). In 2012, the fisheries subsector contributed 
14.2% to total agricultural value-added/output.
25 Its capture production was 17th in the world and 
11th in Asia in 2010; it also ranked 16th in the world and 11th in Asia for aquaculture production.26 
Malaysia's apparent consumption, of 53.3 kg of fish products per capita in 2009, was 2.9 times the 
world average, and higher than that of any developed country except Japan.27 As a result, in 2012, 
Malaysia imported about US$219 million more fisheries products than it exported.28 The number of 
fishing vessels increased from 49,756 vessels in 2010 to 54,235 vessels in 2012; according to the 
authorities the main reason for this apparent increase was the registration of traditional 
outboard-powered fishing boats, under their "reg ularization" exercise, which sought to gather 
better information on fisheries to better assist stakeholders' decision-making. Among these vessels 
over half (2010) were licensed to fish with drif t/gill nets. The trawlers, which are offshore vessels 
of 70 GRT and above, and operate beyond 5 nautical miles off the coast, are the most efficient vessels, taking up to 50.3% of the catch, followed by the purse seiners (25.2%), and vessels operating drift/gill nets (13.19%).
29  
4.22.  Under Malaysia's National Agricultural Policy 1998-2010, fish production targets were set at 
1.93 million tonnes for 2010, with 900,000 tonnes coming from coastal fisheries, 430,000 tonnes from the offshore sector, and 600,000 tonnes from the aquaculture industry. The estimated 
optimal yield of 900,000 tonnes from coastal waters has been largely exceeded.
30 Under the 
National Agro-Food Policy 2011-2020, strategies to modernize and transform capture fisheries 
                                               
23 WTO document G/STR/N/11/MYS, G/STR/N/12/MYS G/STR/N/13/MYS, G/STR/N/14/MYS, 
2 September 2013. 
24 Ministry of Finance (2013). 
25 Malaysia Productivity Corporation  (2013b). 
26 Department of Statistics, Malaysia (2012d). 
27 FAO Statistics. Viewed at: ftp://ftp.fao.org/FI/STAT/ summary/FBS_by continent.pdf  
[18 January 2012]. 
28 UNSD Comtrade database. 
29 FAO Fishery and Aquaculture Country Profiles. Viewed at: 
http://www.fao.org/fishery/facp/MY S/en#CountrySector-OrgsInvolved . 
30 FAO Fishery and Aquaculture Country Profiles. Viewed at: 
http://www.fao.org/fishery/facp/MY S/en#CountrySector-OrgsInvolved . WT/TPR/S/292 • Malaysia 
 
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  include: the strengthening of infrastructure; the restructuring of its activities; and the institutional 
coordination of the functions of the Department of Fisheries (DOF) and the Fisheries Development 
Authority of Malaysia.31 The contribution from coastal fisheries is expected to be reduced from 
71% in 2010 to 65% by 2020, the remainder being covered by deep-sea fishing. The development 
of coastal fisheries will be largely guided by sustainable fisheries principles, including through the 
use of environmentally-friendly fishing gear, Ecosystem Approach to Fisheries Management, establishment of artificial reefs, fisheries refugi a, and other conservation measures. Contribution 
from the deep-sea fisheries is expected to be increased from 29% in 2010 to 35% by 2020. 
4.23.  Policies are targeted at maintaining th e maximum sustainable yield. The measures to 
control fishing include constant monitoring of the resource situation, direct limitation of fishing, and a direct limitation on the issuance of new or additional fishing licences for fishing in coastal 
waters to ensure that there is no overexploitation . It appears that fishing licences are only issued 
to local fishing vessels. Malaysia implements an input control regime consisting of measures such as the zoning system, limit of fishing vessels, vessels tonnage, type of fishing gear and engine 
capacity. Currently, the Government has not set up individual transferable quotas (ITQs) or total 
allowable catch (TAC) schemes due to the complexity  of the multi-specie and multi-gear fisheries 
in Malaysia.  In 2011, the DOF's legal section processed a total of 615 arrest cases (842 in 2010) 
for various offences under the Fisheries Act 1985. Since 2012, Malaysia has rejected four 
applications by IUU foreign fishing vessels to land their catches in Malaysian ports, consistent with its commitment under the 2007 Regional Plan of Action (RPOA) to Promote Responsible Fishing 
Practices Including to Combating Illegal, Unreported and Unregulated Fishing in the Region 
(IUU).
32 
4.24.  Malaysia implements a resource enhancement programme through the establishment of 
artificial reefs and public water bodies restocking programme (2.5 million juveniles in 2010, 
increased to 6.24 million in 2011). To promote sustainable and good aquaculture practice, 
Malaysia has applied an Aquaculture Certification Scheme since 1999. Malaysia requires an environmental impact assessment (EIA) for aquacu lture projects involving areas of 50 acres and 
more located in environmentally sensitive areas (e.g. mangrove areas). A series of programmes to 
raise awareness have been conducted for the implementation of the Code of Conduct for Responsible Fisheries (CCRF) among fisheries mana gers and stakeholders. Malaysia is preparing a 
National Ecosystem Approach to Fisheries Mana gement (EAFM) Framework. Furthermore, it 
maintains a National Plan of Action (NPOA) for IUU and is in the process of reviewing the NPOA 
Sharks and NPOA Fishing Capacity.  
4.25.  Under the Fisheries Act 1985, fishing licences are only issued to local fishing vessels; thus 
far, there has been no foreign investment in offshore and coastal fishing in Malaysia. Under the 
same Act, fishing in Malaysian waters by foreign fishing vessel is subject to international fishery agreements between the governments of Malaysia and the country concerned. Fishing permits for 
foreign vessels may be issued by the Department of Fisheries under the terms of "access 
agreements" signed between Malaysia and the respective foreign governments.
33 So far, Malaysia 
has not entered into any international fishery agreements.  
4.26.  Fish and fish products are subject to tariffs ranging from zero to 20% (Table A3.1). 
Ornamental fish receive a corporate tax allowance of 10% of the increase in their export value 
(section 3.3.5). All of Malaysia's SPS notifications during 2010-13 (July) concerned fish (2 live fish, 4 ornamental fish) (section 3.2.5.2.5). Malaysia provides domestic support for its fisheries sector. 
Until 31 May 2011, trawlers above 70 GRT were able to buy diesel at RM 1.25 (US$0.41), 
compared with the already subsidized RM 1.80 payable after that date (section 4.5.1); it seems that the subsidy remains in place for other fishing vessels.
34  
                                               
31 Ministry of Agriculture and Agro-Based Industry (2011). 
32 The RPOA is a joint initiative between the gove rnments of Australia and Indonesia to combat IUU 
fishing activities; it was endorsed by Australia, Brunei Darussalam, Ca mbodia, Indonesia, Japan, Malaysia, 
Papua New Guinea, China, the Philippines, Singapore, Thailand, and Viet Nam (RPOA online information. Viewed at: http://www.rpoa.sec.kkp.go.id/ ). 
33 FAO online information, "Corporate  Document Repository: Malaysia Table A: Limits of territorial seas, 
fishing zones and exclusive economic zones" . Viewed at: http://www.fao.org/docrep/v9982e/v9982e2m.htm . 
34 Under this scheme the Government has subsidized 25,000 to 28,000 litres of diesel equivalent to 
RM 31,250 (US$10,271) and RM 35,000 (US$11,503) respectively, for each vessel every month, and vessels could use up to an average of 14 million litres of diesel every month (Fisheries Subsidies Blog online WT/TPR/S/292 • Malaysia 
 
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  4.4  Mining and quarrying 
4.27.  Between 2008 and 2012, the contribution of  mining (including fuels (section on 4.5.1))35 
and quarrying to GDP dropped from 11.4% to 10.4% due to world prices volatility, while its share 
in total employment remained relatively stable at 0.3%-0.4% (Table 1.2). According to the 
Malaysia Productivity Corporation, TFP declined by 14.9% during the same period, partly due to 
the sharp increase in commodity prices, while capi tal and labour productivity improved by 6.7% 
and 5.5% respectively.36 In 2012, the sector's labour productivity was the highest in the economy, 
inter alia , owing to its relatively high capital intensity.37 Malaysia is endowed with over 33 different 
mineral types. In 2011, gold, iron, coal, and tin contributed 10.3%, 25.8%, 6.9%, and 3.7% of the 
mining gross output (in value terms) respectively; other metal ore mining, including bauxite, silica, 
ilmenite, and other non-ferrous metals, accounted for 2.4%, while non-metallic minerals including 
silica, kaolin, mica, and feldspar accounted for 50.9%.38 Despite the continuing good global 
demand and high prices for most metals and minerals in recent years the industry remains sluggish.
39 Malaysia is among the world's top ten producers for refined tin and mined tin, with rare 
earths being a by-product.40  
4.28.  The sector's development remains guided mainly by the 2009 Second National Mineral 
Policy (NMP2), aimed at ensuring the sustainable development and optimum use of minerals in an 
environmentally sound and responsible manner.41 Its main laws and regulations also remain 
unchanged, and include the Mineral Development Act 1994 (effective 1998), the State Mineral Enactments, and the State Quarry Rules. Mineral products (apart from crude oil and gas section 4.5.1) are the property of the federal states. At the federal level, mining is regulated 
mainly by the Ministry of Natural Resources and Environment, through its Minerals and 
Geosciences Department. State governments are responsible, inter alia , for issuing mineral 
licences and mining leases. Private (domestic and foreign) companies may obtain licences or 
leases to engage in exploration or mining of mineral products. The number of approvals granted 
on applications for exploration licences, prospecting licences, mining leases and their renewals has grown; between 2010 and 2011, 307 approvals were granted.
42 As a consequence, there was an 
increase in new exploration and mining activity as well as capacity expansion in the industry 
during the period under review. Mine and quarry operators are required to pay value-based royalties to the State in which their operation is located. Their level depends on the mineral commodity and on the assessment of each of the individual states.
43 In general, the royalty rate 
on all metallic minerals is 5%, while the rates for non-metallic minerals (rock material) range from 
US$0.3 to US$1.16 per cubic meter. Royalty rates for non-metallic minerals may be higher for exports; for example, in the State of Johor, roya lties on rock material for export are four times 
higher than those for domestically used material. Iron ore and raw gold account for the largest 
part of revenue from royalties.   
4.29.  Mining products remain subject to relatively  high tariff protection ranging from zero to 50% 
(portland cement), export licensing, and a 5% export tax (12 nine-digit items, slag ash and 
residues) all of which may act as an implicit subsidy to downstream processing (Table A3.1, sections 3.3.2 and 3.3.3). Like other sectors of the economy, mining benefits from general tax incentives such as those under the pioneer status, double deduction tax incentives, investment tax 
allowance, and reinvestment allowance schemes (sections 3.4.1 and 3.4.5).
44  
                                                                                                                                               
information. Viewed at: http://fisheriessubsidies.blog spot.ch/search/l abel/Malaysia ); and Borneo Post,  "Trawler 
operators still enjoying subsidy for diesel", 8 June 2011. Viewed at: 
http://www.theborneopost.com/2011/06/08/trawler-operators-still-enjoying-subsidy-for-diesel/ ). 
35 According to the authorities, mining (excluding fuel) and quarrying accounte d for about 0.2% of the 
GDP. 
36 The authorities indicated that the sharp increase in prices of mining commodities stimulated 
substantial growth in new investment in capital and labour inputs. Long lead-times between investment in new capacity in mining and the associated output response can lead to short-term TFP movements that are unrelated to underlying efficiency. 
37 Malaysia Productivity Corporation  (2013b).  
38 Department of Statistics (2012c). 
39 Malaysiaminerals.com online information. Viewed at: http://malaysianminerals.com/overview.html . 
40 Malaysiaminerals.com online information. Viewed at: http://malaysianminerals.com/overview.html . 
41 WTO document WT/TPR/S/225/Rev.1, 15 February 2010. 
42 Malaysiaminerals.com online information. Viewed at: http://malaysianminerals.com/overview.html . 
43 U.S. Department of the Interior/U.S. Geological Survey (2013).  
44 Malaysiaminerals.com online information. Viewed at: http://malaysianminerals.com/fiscal-
regimes.html . WT/TPR/S/292 • Malaysia 
 
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  4.30.  Foreign equity participation of up to 100% is permitted in the extraction, mining, and 
processing of mineral ores. In 2012, mining (99% in oil and gas (section 4.5.1)) was among the leading subsectors with high levels of approved investments, of which 64% were foreign.
45 When 
approving these projects, the Government consider s the investment level, technology, and risk 
involved; availability of Malaysian expertise; and the value-added level. The same criteria apply to 
domestic investors. 
4.31.  In February 2013, a foreign-invested plant processed the first rare-earths products of 
non-Malaysian origin.46  
4.5  Energy 4.32.  Malaysia's energy production remains base d around oil and natural gas, and the sector is 
still a major contributor to the economy, particularly with respect to exports of hydrocarbons 
(section 4.5.1). In 2011, Malaysia's energy supply and demand per head was among the highest in 
the Association of South-East Asian Nations (ASEAN) countries. Between 2008 and 2011, its primary energy supply increased more than four times faster than demand (15.6% 
versus 3.5%).
47 The share of natural gas in the primary en ergy supply rose while that of crude oil 
dropped; in 2011, the primary energy supply mix (in toe terms) consisted of natural gas (45.1%), crude oil (31.1%), coal and coke (18.6%), petr oleum products (2.8%), and hydropower (2.3%).
48 
During the same period, energy demand increased in virtually all sectors except for manufacturing 
where it dropped steadily due to lower demand of natural gas. In 2011, energy demand was led by transport (39.3%), followed by manufacturing (27.8%), residential and commercial (16.1%), and agriculture (2.1%).  
4.33.  According to the 2010 New Energy Policy Study under the 10
th Malaysia Plan 2011-2015 
(section 2.3), energy supply would continue to be strengthened by creating a more competitive 
market and gradually reducing the energy subsidy.49 The policy envisages: rationalizing energy 
pricing gradually to match market prices; more strategic development of energy supply by 
diversifying energy resources (including rene wable energy resources and nuclear energy); 
accelerating the implementation of energy efficiency initiatives; improving governance to support 
the transition to market pricing; and ensuring  policy implementation based on an integrated, 
scheduled approach to achieve security of ener gy supply. The Energy Commission of Malaysia 
under the Ministry of Energy, Green Technology  and Water is responsible for regulating the 
electricity supply and piped gas supply industries in Peninsular Malaysia and Sabah.  
4.34.  Malaysia's depleted natural gas and oil reserves and increasing demand for energy, have 
shifted the focus on renewable energy from an "opt ion" to an "immediate and high priority energy 
solution", although the Government has intend ed to expand into renewable energy sources 
since 2001.50 Nevertheless, the contribution of renewabl e energy to the national grid has so far 
been negligible.51 Malaysia's 2009 Renewable Energy (RE) policy aims at: increasing 
RE contribution in the national power-generation mix; facilitating the growth of the RE industry; 
ensuring reasonable RE generation costs; conserving the environment for future generations; and 
enhancing awareness of the role and importance of RE.52 This policy set a target for RE to attain 
an installed capacity of 985 MW (2,080 MW in 2020) covering 6% (11% in 2020) of the power mix by 2015. Under the 2010 New Energy Policy Study, emphasis was to be placed on the use of 
renewable energy and increasing energy efficiency through the introduction of a feed-in tariff (FiT) 
for RE-based power, and a Renewable Energy Fund, set in December 2011 and financed by 1% charge on all users, except for those consuming less than 300 kilowatt-hours (kWh) or RM 77.00 
                                               
45 MIDA (2012). 
46 The plant receives and processes Australian raw reso urces (Lynas Ltd. online information. Viewed at: 
http://www.lynascorp.com/Pages/advanced- materials-plant-kuantan-malaysia.aspx ). 
47 EIU (2012b). 
48 Malaysia Energy Information Hub online information. Viewed at: http://meih.st.gov.my . 
49 Speech by the Prime Minister in the Dewan Rakyat, "Tenth Malaysia Plan 2011-2015", 10 June 2010. 
Viewed at: http://www.pmo.gov.my/dokumenattached/speech/files/RMK10_Speech.pdf .  
50 Green Prospect Asia  online information , "Malaysia's renewable energy outlook", 29 September 2012. 
Viewed at: http://greenprospectsasia.com/content/malaysia%E2%80%99s-renewable-energy-outlook . 
51 EIU (2012b).  
52 Presentation by B.A. Malek, "Renewable Energy (RE) Policy & Action Plan", 14 May 2010. Viewed at: 
http://web.utm.my/era/images/ERA/nationa l%20renewable%20energy%20policy%20mosti.pdf . WT/TPR/S/292 • Malaysia 
 
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  in a month, to encourage the implemen tation of renewable energy projects.53 Relevant guidelines, 
standards, and laws were introduced to ensure  the efficient use of energy, and to reduce 
greenhouse gas emissions.54 A 2011 Renewable Energy Act allows private producers of electricity 
generated using RE to feed power into the national grid, and establishes FiT rates for fixed 
periods.55 A Sustainable Energy Development Authority (SEDA) was established in 
September 2011 to, inter alia,  make recommendations on policies, laws, and actions, and to 
promote and implement RE and sustainable en ergy actions, including the FiT system.56  
4.35.  In addition to pioneer status, investment tax allowance, and duty and tax incentives for 
machinery/consumables imports until 2015 (section s 3.2.2.5 and 3.4.1.3), RE activities benefit 
from a sales tax exemption for purchases of locally made machinery, materials, and consumables.
57 At end-September 2013, SEDA had approved 2,589 RE projects representing a 
capacity of 520.48 MW to be delivered mainly by  solar photovoltaic (PV) installations (40%), 
biomass (32%), small hydro (23%), and biogas (5%).58 Total energy output from PV installations 
is insignificant in terms of its contribution to Malaysia's energy mix at present. The bulk of biomass 
comes from palm oil plantations (kernels, biogas) and is currently being used as an alternative 
source of fuel in cement factories and as the main fuel source for a small number of biomass power plants. The burning of household rubbish to generate electricity has been a feature of the 
alternative-energy sector for a number of years, owing to the declining number of landfill sites; 
this source accounted for power generating capacity of 5.5 MW supplied to the national grid in 2009, and capacity is expected to increase gradually in 2013-20.
59 At present there are no wind 
farms and no plans to harness this form of renewable energy on a large scale. The only nuclear 
reactor is a research reactor with a capacity of 1 MW that is owned and operated by a government 
body, the Malaysian Nuclear Agency. Despite safety concerns raised by the Fukushima disaster in Japan in March 2011, a nuclear power plant is to be built and to begin operations by 2025.
60 
4.36.  A 2009 Energy Efficiency Improvement Programme (MIEEEIP) run by the Government in 
cooperation with the United Nations Development Programme (UNDP) yielded encouraging results. It led to energy efficiency improvements of up to 28% in 48 factories (representing 7% of total 
                                               
53 A FiT is a mechanism that woul d allow electricity produced from [indigenous] domestic renewable 
energy resources to be sold to power utilities at a fixed premium price and for specific duration. Malaysia 
details the price ranges for different technologies, project sizes, and applications. The FiT scheme also includes 
bonus FiT that can be obtained for ce rtain applications and a "degression ra te" to gradually reduce the level of 
the FiT based on expectations of re duced costs. However, this scheme is managed based on the maximum 
annual capacity (presentation by B.A. Malek, "Renewable  Energy (RE) Policy & Action Plan", 14 May 2010. 
Viewed at: http://web.utm.my/era/images/ERA/national%20renewable%20energy%20policy%20mosti.pdf ; 
Speech by the Prime Minister in the Dewan Rakyat, "Tenth Malaysia Plan 2011-2015", 10 June 2010. Viewed 
at: http://www.pmo.gov.my/dokumenattached/speech/files/RMK10_Speech.pdf ; Tenaga Nasional Berhad 
Press Release, "TNB Clarifies 1% Additional Charge For Renewable Energy Fund", 2 May 2013. Viewed at: 
http://www.tnb.com.my/announcement/2013/05/tnb-clarifies-1-additional-charge-for-renewable-energy-
fund.html ; and Green Prospect As ia online information , "Malaysia's renewable energy outlook", 
29 September 2012. Viewed at: http://greenprospectsasia.com/cont ent/malaysia%E2%80%99s-renewable-
energy-outlook ).  
54 These include the Feed-in Approval and Feed-in Tariff Rate Rules 2011, Technical and Operational 
Requirements Rules 2011, the REPPA Rules 2011, the Criteria for Renewable Resources Regulations 2011, the Allocation from Electricity Tariffs Order 2011, the Recovery of Moneys by Distribution Licensee Rules 2011, and the Administrative Fees Rules 2011 (presentation by Wei- nee Chen, "Renewable Energy  Status in Malaysia", 
SEDA, 4 December 2012. Viewed at: http://www.mida.gov.my/env3/uploads/events/Sabah04122012/SEDA.pdf ).  
55 The FiT system obliges distribution licensees (DLs, such as Tenaga Nasional Berhad (section 4.5.2)) to 
buy from the renewable energy power producers (feed-in  approval holders (FIAHs) the electricity produced 
from renewable resources, and sets the FiT rate. The DLs pay for renewable energy supplied to the electricity 
grid for a specific duration. For example, for solar photov oltaic (PV) the duration is  21 years. The FiT for solar 
PV power is around RM 1.25/kwh (US$0.40/kwh) (EIU, 2012b). 
56 Sustainable Energy Development Authority Act 2011, 23 May 2011. Viewed at: 
http://seda.gov.my/go-
home.php?omaneg=00010100000001010101000100001000000000000000000000&s=147 . 
57 Green Prospect Asia  online information , "Malaysia's renewable energy outlook", 29 September 2012. 
Viewed at: http://greenprospectsasia.com/content/malaysia%E2%80%99s-renewable-energy-outlook . 
58 Presentation by SEDA, "Renewable Energy Development and Feed-in Tariff (FiT) implementation in 
Malaysia", 16 May 2012. Viewed at: 
http://eeas.europa.eu/delegations/malaysia/doc uments/press_corner/all_news/2012/160512_fp7seda_en.pdf . 
59 EIU (2012b).  
60 EIU (2012b).  WT/TPR/S/292 • Malaysia 
 
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  energy usage in the industrial sector) through no-cost or low-cost measures.61 Various energy 
efficiency (EE) programmes and initiatives were undertaken, such as the Government leading by 
example initiatives (reduction of energy consumption), the Promotion of EE appliances, the Promotion of co-generation, and the SAVE (Sus tainability Achieved via Energy efficiency) 
Programme. Work for an Energy Efficiency and Conservation Bill was under way in mid-2013 and 
was unlikely to be passed in 2014 due to concerns that the law does not leave any gaps (e.g. transport sector).
62 In May 3013, regulatory changes made under the Electricity Amendment 
Regulations 2013, to the Electricity Supply Act 1990, set minimum energy performance standards 
for efficient use of electricity by refrigerators, domestic fans, televisions, air conditioners, and incandescent lamps.
63 A National Energy Efficiency Master Plan setting out a strategy for 
addressing energy security, global warming, an d climate change issues was expected to be 
announced in 2013.  
4.37.  Energy subsidization, intended as a mechanism to keep energy affordable, remains a major 
and long-standing fiscal, budget, developmental, environmental, and thereby political issue in 
Malaysia (sections 3.4.2.2, 3.4.4.2, 4.5.1, and 4.5.2).64 In addition to the opportunity cost of 
investing resource revenues in productive capital,  subsidized prices of petrol, diesel, and natural 
gas play an important role in distorting resour ce allocation by encouraging inefficient energy 
consumption.65 According to the International Energy Ag ency, spending on energy subsidies was 
estimated at 2.6% of GDP and 11.2% of the Government's operating expenditure in 2011 
(Table 4.3).66 Between 2009 and 2011, spending rose 44.5% , due to increased support on petrol 
prices, which are among the lowest in Asia (and the world).67 Subsidy reform forms part of the 
2009 New Economic Model and the 10th Malaysia Plan 2011-2015 (section 2.3). A May 2010 
Subsidy Rationalization Programme (SRP), involving a phased five-year reduction of subsidies on gasoline, cooking gas, electricity, and road tolls, and projected to save a cumulative total of 
US$33 billion, achieved little as the Government "changed its focus to cost of living" issues 
in March 2012; it was reactivated in September 2013 (section 3.4.4.2).
68  
Table 4.3 Energy subsidies, 2009-11 
 2009 2010 2011 
Subsidies as share of GDP (%) .. .. 2.60 
Average subsidization rate (%) .. .. 18.4 
Subsidy (US$/person) .. .. 253.3 
Annual subsidy cost (US$ billion)     
Oil 1.58 3.89 5.35 
LNG 1.68 0.97 0.89 
Coal 0 0 0 
Electricity 1.71 0.81 0.94 
Total 4.97 5.67 7.18 
.. Not available. 
Note: The IEA figures are based on a methodology ca lled the "price-gap approach," which compares 
average end-user prices paid by consumers wi th reference prices for the cost of supply. 
Source: International Institute for Sustainable Development (2013),  A Citizens Guide to Energy Subsidies in 
Malaysia, 2013 , May. Viewed at: 
http://www.iisd.org/gs i/sites/default/files/ffs_malaysia_czguide.pdf ; and International Energy 
Agency Subsidies Database. Viewed at: http://www.iea.org/subsidy/index.html.  
                                               
61 Speech by the Minister of Energy, Green Technology  & Water at the Conference on Energy Efficiency 
and Conservation, 19 July 2012. Viewed at: http://www.kettha.gov.my/en/content/fmm-conference-energy-
efficiency-and-conservation-2012-%E2%80%9Cee -c-competitive-edge-manufacturers%E2%80%9D .  
62 Green Prospect Asia  online information , "Delay likely for Malaysia's energy efficiency law", 
11 October 2012. Viewed at: http://www.greenprospectsasia.com/co ntent/delay-likely-malaysias-energy-
efficiency-law#sthash.9bFFPLBD.dpuf . 
63 Electricity Amendment Regulations 2013. Viewed at: 
http://www.st.gov.my/v4/images/stories/about_us/20130503_P_U__A_151-PERATURAN_-
_PERATURAN_ELEKTRI K_PINDAAN_2013.pdf.  
64 For more information about the impact of energy  subsidization, see International Institute for 
Sustainable Development (2013). 
65 Gil Sander et al. (2013). 
66 International Institute for Sustainable Development (2013). 
67 EIU (2012a).  
68 OECD (2013b); and EIU (2012a). WT/TPR/S/292 • Malaysia 
 
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  4.5.1  Hydrocarbons 
4.38.  Malaysia is Asia Pacific's 4th largest crude oil producer (2011, world's 29th) and the world's 
3rd largest exporter of liquefied natural gas (2010,  10% of world market supply). Taken together, 
their share in the value of total exports rose from 14.8% in 2009 to 20.3% in 2012.69 Malaysia 
used to be a net exporter of oil, but became a net importer in 2011 owing, inter alia,  to distortions 
in the domestic energy market, where demand for petroleum products has been growing faster than production. Nevertheless, Malaysia continues to supply oil to India, Australia, Thailand, 
Japan, Korea (Rep. of), and Singapore.
70 Between 2009 and 2011, crude oil and condensates 
production dropped by 13.5% to about 208 milli on barrels while reserves increased 6.2% 
to 5.9 billion barrels.71 During the same period, natural gas production rose 8% to 69.8 million 
toes, and reserves by 2.3% to 87.988 trillion standard cubic feet. Domestic consumption of 
petroleum products declined by 0.9% to 23.9 trillion toes, while consumption of natural gas rose 
by 8.9 trillion toes from 2009 to 2011. Around 20% of the natural gas, the main fuel used in 
electricity generation, used in peninsular Malaysia  is imported from Indonesia. Recently improved 
labour productivity in mining (section 4.4) was, inter alia , due to a combination of the higher 
production of natural gas and crude oil, discovery of new oil fields, revival of matured oil fields, continual technological improvement, skills enhancement, as well as increase in scale and 
character of capital inputs, specifically in the extraction process of oil.
72  
4.39.  Policy in the hydrocarbons sector (another  NKEA subject to an EPP) (section 4.2.2), is 
focused on enhancing output from existing oil an d natural gas fields and advancing exploration in 
deep-water areas in line with the 1980 National Depletion Policy.73 Tax and investment incentives 
introduced in 2010 aimed to promote oil and na tural gas exploration and development. Their 
target is to increase aggregate production capacity by 5% per year up to 2020 to meet domestic demand growth and to sustain crude oil and LNG exports to overseas markets. Malaysia also aims 
to become a regional oil storage and trading hub, taking advantage of its strategic location in the 
centre of the Asia-Pacific region. 
4.40.  Malaysia's crude oil and gas deposits are owned entirely by Petroliam Nasional Berhad 
(PETRONAS), a corporation wholly owned by the Go vernment (section 3.4.3). Under the Petroleum 
Development Act 1974, PETRONAS has exclusive rights  of ownership, exploration, and production 
of petroleum, and is responsible for the planning, investment, and regulation of all upstream activities. To some extent PETRONAS appears to act as an oil fund from the point of view of 
macroeconomic management.
74 PETRONAS retains some export earnings overseas and has made 
significant direct investments domestically in downstream industries as well as in production abroad.
75 This has reduced the flow of foreign exchange into the economy (thus reducing 
exchange rate pressures), supported downstream di versification, and built assets to provide for 
future generations. As production expanded, th e share of oil receipts in total fiscal revenues 
declined, and transfers to the budget were less volati le than oil rents. As of 2012, the book value 
of PETRONAS equity corresponded to 36% of GD P. PETRONAS remains the biggest contributor to 
the government budget (dividend payouts, oil royalties, and taxes), accounting for about 40% of the Federal Government's revenues or RM 207.2 billion in 2012, up from 39.3% in 2008. It has proposed to cap dividend payouts to the Government at 30% of its net profit so as to reinvest 
remaining profits in global oil gas exploration amid declining domestic supplies.
76  
                                               
69 Organization of the Petroleum Exporting Countries  (2012); U.S. Energy Information Administration. 
Viewed at: http://www.eia.gov/countries/cab.cfm?fips=MY ; UNSD Comtrade database; and CIA  World 
FactBook online information. Viewed at: https://www.cia.gov/library/publications/the-world-
factbook/geos/my.html . 
70 EIU (2012b). 
71 Malaysia Energy Information Hub online information. Viewed at: http://meih.st.gov.my . 
72 Malaysia Productivity Corporation  (2013b). 
73 U.S. Energy Informatio n Administration online information. Viewed at: 
http://www.eia.gov/countries/cab.cfm?fips=MY .  
74 Gil Sander et al. (2013). 
75 PETRONAS's significant investment in production/m anufacturing (downstream activities only) outside 
of Malaysia is mainly through its South African subsidiary Engen Ltd. PETRONAS also has smaller 
blending/bottling/production plants in Brazil, Italy, China, Belgium, the Philippines, and Viet Nam. 
76 PETRONAS net profit declined by 17.2% to RM 49.4 billion in 2012 from previous year ( The Edge  
online information , "No caps on Petronas dividends?", 22 May 2013. Viewed at: 
http://www.theedgemalaysia.com/features/239511-no-cap-on-petronas-dividends.html ). Between 2010 and 
31 December 2012, major PETRONAS investments abroad were the acquisition of Progress Energy Resource WT/TPR/S/292 • Malaysia 
 
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  4.41.  Several other domestic and foreign firms are involved in upstream operations in Malaysia.77 
PETRONAS remains the regulator of upstream activities in both oil and gas. Companies wishing to participate in the upstream sector are subject to production-sharing contracts (PSCs) or risk service contracts (RSCs) with PETRONAS. For PSCs, a minimum equity participation of 15% of 
PETRONAS' subsidiary, PETRONAS Carigali Sdn Bhd, is required. In financial year 2012, 9 PCSs 
and 2 RSCs were signed, and a total of 95 PSCs and 3 RSCs were in operation. Foreign investment in the downstream petroleum and gas industries is not restricted: up to 100% foreign equity 
participation is allowed. 
4.42.  Downstream petroleum industry activities ar e regulated by the Ministry of Domestic Trade, 
Co-operatives and Consumerism (MDTCC), and the Ministry of International Trade and Industry (MITI). The MDTCC issues permits to commence or continue any business of marketing or 
distributing of petroleum or petrochemical products, and MITI issues licences for the processing 
and refining of petroleum and the manufacture of petrochemical products. Downstream activities of the gas industry, on the other hand, are regulated by the Energy Commission (section 4.5). 
4.43.  In addition to PETRONAS, other upstream petroleum and gas companies remain substantial 
sources of government revenue in Malaysia, mainly because they pay a higher tax rate than other economic operators (section 3.4.1.2 and above). Under the Petroleum Income Tax Act 1967, 
upstream petroleum and gas companies are subject to 38% tax on income from the sale of crude 
oil and natural gas extracted from Malaysia, or from the sale of a type of petroleum spirit. A royalty rate of 10% is charged on oil producti on. Income derived from downstream petroleum 
activities, such as the refining of petroleum or the processing of petroleum products, is taxed at 
the statutory rate of 25%.  
4.44.  Import tariffs on petroleum oils range from zero to 5%.
78 An export duty of 10% remains on 
crude oil and condensate, but not on natural gas (section 3.3.3). Exports of petrol, diesel, and 
liquefied petroleum gas are subject to approval as they are subsidized and subject to ceiling prices 
(sections 3.3.2 and 3.4.4.2). 
4.45.  Despite intended reform and price rationalization plans, Malaysia's fuel subsidization system 
continues to keep domestic prices among the lowest in Asia (sections 3.4.2.2, 3.4.4.2 and 4.5, 
Table 4.4).79 Prices have been set for petrol (RON92 and subsequently RON95), diesel, and 
liquefied petroleum gas since 1983, through an au tomatic pricing mechanism (APM). Although the 
price of RON97 has been allowed to float since Se ptember 2009, the prices of RON95, diesel, and 
LPG have barely changed since 2009, meaning that price fluctuations have not been passed 
through to the consumer. The APM maintains a low retail price for petroleum products by ensuring that the difference between the retail price and ac tual market price is covered by the exemption 
from sales tax and subsidies.
80 In 2012, it was estimated that 28% of the retail price of petrol 
RON95, 32% of diesel, and 51% of LPG was covere d by subsidies (Table 4.4); a reduction of the 
petrol subsidy by RM 0.20 per litre took place on 3 September 2013. Furthermore, the  
transportation sector, public buses, trucks, passenger ferries and boats, and certain type of fishing 
                                                                                                                                               
Corp and North Montney Shale Gas Project in Canada, Gladstone LNG Project in Australia, and upstream 
activities in Iraq, Egypt, and Turkmenistan. 
77 These major oil and gas companies include BHP Billi ton Petroleum (Sabah) Corporation, Conoco Asia 
Pacific Sdn Bhd, ExxonMobil Exploration And Production Malaysia Inc, Hess Oil & Gas Sdn Bhd, Inpex Offshore 
North West Sabah Ltd, Lundin Malaysia B.V., MDC Oil & Gas (SK 320) Ltd 12, Murphy Peninsular Malaysia Oil 
Co. Ltd., Murphy Sabah Oil Co. Ltd., Murphy Sarawak Oil Co. Ltd., Newfield Peninsula Malaysia Inc., Newfield 
Sarawak Malaysia Inc., Nippon Oil Exploration (Malaysia)  Ltd, Petrofac (Malaysia PM-304) Limited, Petroliam 
Nasional Berhad, Shell Malaysia, Talisman Malaysia Ltd, and Total E&P Malaysia. 
78 Three tariff lines at the HS nine-digit level are charged the 5% duty: 270900900 (crude oils from 
bituminous minerals), 271012100 (petroleum oils partly refined), and 271019200 (medium oils and preparations). 
79 Malaysia's end-user gas prices are the second lowest in south-east Asia, behind Brunei Darussalam 
(Institute for Sustainable Development, 2013). 
80 To calculate the fuel price, the product cost, operational cost, oil company margin, station operator 
margin, and sales tax are added up to make the actual  price. Then, the sales tax and subsidy are deducted 
from this to obtain the retail price. The APM takes into consideration six components in the pricing mechanism through which it constructs the retail price of fuel: the reference product cost of petroleum products (Mean of Platts Singapore (MOPS)); the "Alpha" difference between the MOPS price and purchase price of Malaysian oil 
companies; the operational costs covering transport an d marketing costs of petrol eum products; the petrol 
station operators' margin; and the sales tax and subsidy (International Institute for Sustainable 
Development, 2013). WT/TPR/S/292 • Malaysia 
 
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  vessels benefit from additional diesel price subsidization, and electricity generators are additionally 
subsidized through a centrally imposed low gas price (sections 4.3 and 4.5.2). Additional fuel subsidies seem to be subject to a quota-allocation system.   
Table 4.4 Fuel price subsidies and comparison, 2012  
 LPGa 
(RM/14 kg tank)  Petrol RON95 
(RM/litre) Diesel 
(RM/litre) 
Actual price 47.57 2.74 2.80 
Consumer price 26.60 1.90 1.80 
Subsidy 20.97 0.84 1.00 
Subsidy (%) 51 28 32 
Price differences across neighbouring 
countries, December 2012    
Thailand 2.80 4.90 3.12 
Singapore 7.94 5.66 4.30 
Indonesia 2.06 3.04 3.52 
Malaysia 1.90 1.90 1.80 
Brunei Darussalam - 1.50 0.90 
a Liquefied petroleum gas. 
Source: Ministry of Domestic Trade, Cooperatives & Consumerism; International Institute for Sustainable 
Development (2013), A Citizens Guide to Energy Subsidies in Malaysia 2013 , May. Viewed at: 
http://www.iisd.org/gs i/sites/default/files/ffs_malaysia_czguide.pdf ; International Energy Agency 
Subsidies Databa se. Viewed at: http://www.iea.org/subsidy/index.html ; and data provided by the 
Malaysian authorities.  
4.46.  Subsidies in their current form are not efficient as they seem to benefit mainly middle and 
high-income groups, as well as foreigners and businesses.81 They have also encouraged 
over-consumption of fuel and substantial smuggling activities (section 3.2.1.1 and 3.4.2.2). Losses 
due to smuggling are estimated at RM 10 million (US$3.1 million) a year for LPG alone, and each 
successful diesel smuggling attempt at 40,000 litres.82 Subsidized fuels are also illegally traded 
within Malaysia, as subsidized petroleum produc ts intended for consumers are diverted to the 
industrial sector. This occurs in spite of a "n ano-tagging" system introduced in 2006 for marking 
the subsidized petrol and diesel to ensure it  is not used by industries. Between 2011 and 
2013 (July), there were 1,097 cases relating to subsidized petroleum products involving the 
seizure of diesel oil worth a total of RM 16.5 million.  
4.47.  LNG is primarily transported by Malaysia International Shipping Corporation (MISC), which 
owns and operates 27 LNG tankers, one of the la rgest LNG tanker fleets in the world by volume 
carried. MISC is 62% owned by PETRONAS.83  
4.5.2  Electricity 
4.48.  Electricity generation comes principally from natural gas (52.7%, 2012), coal (38.9%) and 
hydro (7.3%).84 The sector is dominated by a range of independent power producers (IPPs), which 
contribute around 40% of national electricity supply, and three government-linked companies 
(GLCs) (section 3.4.3): Tenaga Nasional Berhad  (TNB), which oversees Peninsular Malaysia; 
Sarawak Energy Berhad (SEB), in charge of Sarawak; and Sabah Electricity Sdn. Bhd (SESB), 
which is responsible for  Sabah and Labuan. In 2011, the highest consumer was the industry sector 
(43.8%), followed by commercial (34.3%), residential (21.4%), transport (0.2%), and agriculture (0.3%). As of 2011, foreign equity in power generation was allowed up to 49% while for transmission, only the main domestic utilities companies are allowed to own. This reflects the 
Government's intention to increase the competitiveness in the generation segment while the 
transmission segment involves national security matters. For electricity distribution, foreign equity is generally allowed only up to a 30% stake in a designated franchise.  
                                               
81 OECD (2012b). 
82 International Institute for Sustainable Development (2013). 
83 EIA online information, "Malaysia". Viewed at: http://www.eia.gov/countries/cab.cfm?fips=MY  
[14.06.2013]. 
84 PM Department/Economic Planning Unit (2012); and International Institute for Sustainable 
Development (2013). WT/TPR/S/292 • Malaysia 
 
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  4.49.  TNB, the single largest electricity company in Malaysia and the largest power company in 
south-east Asia, is a government linked compan y (GLC) "private company" wholly owned by the 
Government. Its share of total generation capacity in Peninsular Malaysia is 32% (via fully owned TNB plants) and another 22% (through TNB participation in IPP plant), and it retains a monopoly 
over power transmission and distribution services.
85 N e v e r t h e l e s s ,  I P P s  h a v e  b e e n  a b l e  t o  s i g n  
rigid power purchase agreements (PPAs) with their respective GLCs since 1994, enabling them to monopolize local transmission and distribution systems  within certain restricted areas.
86 The first 
generation IPPs (gas based) hold 21-year concessions that will end in 2015-2016; the concession 
of second and third generation IPPs will be expiring in the period 2020 to 2033, and the new 
plant-up capacities will be selected via a competitive bidding process.87 Similar to PPA practices 
elsewhere in the world, and under past power-industry privatization policies, TNB is obliged to pay 
a capacity payment of more than RM 4 billion (US$ 1.3 billion) a year to nine IPPs, irrespective of 
the level of power demand. Under the PPA system, fuel cost can be passed through to the end user; nevertheless, costs of gas shortages are borne by the Government and PETRONAS.
88  
4.50.  Electricity generators are subsidized through a Government regulated low gas price, to keep 
production costs low and ensuring affordable electricity tariffs to end users. This measure has allegedly created inefficient IPPs with bloated cost structures.
89 As of 1 June 2011 PETRONAS was 
required to sell gas to electricity generators at a controlled price of RM 13.70 (previously RM 10.70 
or US$3)) per million metric British thermal units (mmbtu). As a result, in 2011, PETRONAS lost an estimated RM 20.1 billion (US$6.4 billion) or 2.3% of GDP in forgone revenues by subsidizing the gas (part of which is imported, section 4.5.1) used by for the power (TNB, IPPs) and non-power 
sectors.
90 According to a research report by Maybank (October 2012), Gas Malaysia, the monopoly 
retail arm that acts as the final seller of gas to manufacturers, agreed on a plan with PETRONAS of a two-tiered pricing mechanism, with one tier based on the existing price for gas sourced within 
Peninsular Malaysia, and another, higher price, based on the additional gas sourced through the 
imported LNG.
91 SESB also receives substantial diesel and fuel oil subsidies from the Government 
to lower the cost of electricity generation; these amounted to RM 538.1 million (US$164.3 million) 
in 2012.   
4.51.  Electricity tariffs remain subsidized. Their budgetary cost dropped by an overall 45% 
over 2009-11 (section 4.5, Table 4.3). Tariffs va ry depending on the consumption level, voltage 
(low, medium, high), and consumer category (e.g . residential, commercial, industrial, mining, 
agriculture) thus allowing for cross-subsidization among user groups.92 TNB's tariffs, applicable in 
Peninsular Malaysia only, were last revised on  1 June 2011. The SESB and SEB have their own 
tariff structure, effective since 15 July 2011 and 1 April 2007 respectively. The tariff rates increase 
progressively in line with rising consumption, depending on the consumer group. FiT tariffs for 
electricity from RE sources have been in place since December 2011 (section 4.5) and are higher than the conventional tariffs.
93 Industrial consumers whose total annual electricity bills represent 
5% or more of their total annual operational costs are entitled to lower rates under a Special 
Industry Tariff (SIT) regime. The Government is looking at ways to gradually phase-out the SIT.94 
According to the Energy Commission's estimates, in 2011 the average selling price of electricity by TNB was up to 32% higher for commercial and agricultural users (RM 0.3819/kWh and 
RM 0.3724/kWh, respectively) than for industry (RM 0.2894/kWh). The same applies to SESB and 
                                               
85 TNB online information. Viewed at: http://www.tnb.com.my/about-tnb/history.html . 
86 Institute for Sustainable Development (2013). 
87 The first generation IPPs were signed in 19 93 and 1994; second generation IPPs were signed 
around 1998–01, while third generation IPPs refer to those from 2002 onwards. 
88 For example, a prolonged gas shortage caused by  maintenance activities at PETRONAS meant that 
between January 2010 and October 2011, TNB had to burn oil and distillates at a cost of RM 3.1 billion (US$1 billion); the Government paid TNB RM 2.02 billion (US$648 million) in compensation, half of which came from PETRONAS (International Institut e for Sustainable Development, 2013). 
89 It seems that IPPs generate po wer at about RM 0.59 (US$0.19) per kilowatt hour (kWh), which is 
more than residential consumers pay in Singapore (RM 0.52; US$0.17) where electricity is sold at the market 
price, without any subsidies, and with transmission and distribution costs included (International Institute for Sustainable Development, 2013). 
90 Gil Sander et al. (2013). 
91 Gil Sander et al. (2013). 
92 Energy Commission (2013). 
93 The FiT rates for all renewable re sources (except for small hydropower ) are to decrease according to 
their respective annual degression rates at the start of each new calendar year from 2013 onwards, reflecting 
the maturity and the existing cost reduction potential of  all renewable resources (exc ept for small hydropower). 
94 Energy Commission (2013). WT/TPR/S/292 • Malaysia 
 
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  SEB, whose commercial and residential consumers cross-subsidize the lower electricity tariffs for 
industrial activities. Malaysia's average selling prices are the 4th lowest in the region, after 
Indonesia, Korea (Rep. of), and Chinese Taipei. Average selling prices seem to cover own-generation and purchased-power costs.
95 Malaysia's forthcoming energy policy will focus on 
market-based energy pricing; this will mean higher electricity prices that will reflect the real cost 
of supply, and possibly the emergence of ne w players in the energy supply chain by 2015.96  
4.52.  Since 2008, the Government has provided a RM 20 (US$6.4) subsidy on monthly electricity 
bills for all TNB customers.97 Furthermore, TNB gives its "privileged customers" (including public 
schools and institutions of higher learning, places of worship, and welfare homes) a 10% discount on their electricity bills, which it recovers by tariff rebalancing (i.e. cross-subsidization). This concession cost TNB RM 7.8 million (US$2.5 m illion) in 2012, and is due to be extended to 
institutions that are partly funded by the Government.  
4.6  Manufacturing 4.53.  With the notable exception of automotive products, manufacturing remains relatively open 
to both trade and foreign investment (section 4.6.1). Its share of GDP remained relatively stable, 
at around 24% (Table 1.2); its share in empl oyment grew steadily from 27.6% (2009) to 
28.9% (2012). Manufacturing ranks 3
rd behind construction and services in terms of TFP growth; 
during 2008-12 TFP, labour, and capital productivi ty growth averaged 1.41%, 0.12%, and 0.99%, 
respectively.98 In 2013, labour productivity growth of 3% and output growth of 5% was expected 
in the manufacturing sector as industries were expected to make a shift towards more capital-intensive and advanced-technology operations. The share of manufacturing in total exports 
and imports peaked in 2009 (69.6% and 75.1% respectively) then gradually dropped to 61.6% 
and 67.9% in 2012. Office machines and telecommunications equipment remain the main manufactured exports and imports.
99 Malaysia ranks top in the world in terms of the ratio of 
high-technology exports to total exports.100 In 2011, the main activities contributing to the 
value-added of the sector were, inter alia,  manufacture of radio, television, and communication 
equipment and apparatus (17.2%), chemicals and ch emical products (11.2%), and motor vehicles 
and transport equipment (10.6%), a mostly do mestic-oriented activity (section 4.6.1).101 
Government-linked companies (section 3.4.3) like Pharmaniaga Bhd, Chemical Company of Malaysia, and CCM Duopharma Biotech Bhd (18.1% of total assets) remain major stakeholders in chemical manufacturing while others are involved in automotive activities (section 4.6.1).
102  
4.54.  Trade in global value chains (GVCs) is the fastest growing part of international trade, and a 
critical driver of producti vity, growth, and employment.103 Malaysia seeks to gradually restructure 
the foundation and the drivers of growth, in order to  occupy a higher position in the global value 
chain by shifting from low-end manufacturing toward activities that better leverage its strengths 
and natural advantages (e.g. agriculture, agri-based industries, and biotechnology) to take advantage of its fertile bio-resources.
104 Recognizing that there are opportunities to strengthen the 
industry on either end of the value chain, the Go vernment has identified the need to enhance the 
electrical and electronics (E&E) industry compet encies in conceptualization, design, product 
segmentation, marketing, sales, and distribution. In 2010, the domestic value added in Malaysia's exports, which is indicative of the value added gains for a country from exports, was at 58%. It is 
                                               
95 Energy Commission (2013). 
96 Green Prospects Asia  online information , "Malaysia's new energy poli cy emphasises market-based 
energy pricing", 26 September 2012. Viewed at: http://www.greenprospectsasia.com/content/malaysias-new-
energy-policy-emphasises-market-based-energy-pricing#sthash.IFaupTOk.dpuf .  
97 International Institute for Sustainable Development (2013). 
98 Electrical and electronic products , and wood and wood products regi stered high labour productivity 
growth due to initiatives to  address labour shortages by measures in cluding switching to labour-saving designs 
and equipment, and introducing management measures  leading towards leaner organizations (Malaysia 
Productivity Corporation,  2013b).  
99 UNSD Comtrade database. 
100 OECD (2013a). 
101 Department of Statistics (2012b). 
102 Menon and Ng (2013).  
103 Asian International Economists Network online information, "Global Value Chains, Trade Policy and 
Asia", 22 May 2013. Viewed at: http://aienetwork.org/blog/36/global_value_chains_trade_policy_and_asia . 
104 Area Development online information, "Malaysia - Moving Forward Up th e Global Value Chain", 
December 2008. Viewed at: http://www.areadevelopment.com/InternationalLocationReports/dec08/Malaysia-
high-value-growth-028.shtml . WT/TPR/S/292 • Malaysia 
 
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  estimated to have increased by 2.37 percentage points during 1995-2010, compared to the 
declining performance of China (minus 21 pe rcentage points), Korea (Rep. of) (minus 
17 percentage points), and India (minus 12 percentage points).105 Malaysia's GVC participation 
rate (i.e. the share of exports that is part of  a multi-stage trade process) was 68%, ranking it 
7th in the world's top exporting economies.  
4.55.  The Third Industrial Master Plan 2006-2020 (IMP3) aims at achieving long-term global 
competitiveness through the transformation and innovation of the manufacturing and services 
sectors. Twelve manufacturing activities are targeted for further development and promotion so as 
to grow at 5.6% annually and contribute 28.5% to GDP by 2020.106 The 10th Malaysia Plan 
(2011-15) and the New Economic Model (NEM) stress human-capital development and improvements in innovation capacity (section 2.3).  
4.56.  Since 2009, Malaysia's average applied MFN tariff on imports of industrial products has 
dropped from 8% to 6.2% (Table 3.1) due to tariff nomenclature transposition changes, and import duties remain mostly ad valorem
107; t a r i f f  p r o t e c t i o n  r a n g e s  f r o m  z e r o  t o  6 0 %  
(Table A3.1). Average MFN tariff protection dropped considerably in textiles, clothing and 
footwear, and base metals and articles thereof. In 2013, 57.7% (53.5% in 2009) of tariff lines for manufacturing imports (ISIC Rev 2, excluding food  processing) were duty free. Manufacturers are 
encouraged to obtain raw materials as well as machinery and equipment locally; those not 
available locally may be imported duty free (section 3.2.2.5). Sensitive items, including certain motor vehicles and motorcycles, and flat steel products remain subject to non-automatic import licensing (section 3.2.3.1). In government procurement contracts, preferential treatment is given 
to bumiputera  manufacturers for locally produced goods (section 3.2.6). The Government 
continues to promote exports of manufactured products through, inter alia,  tax exemptions on 
statutory income equivalent to 10%, 15%, 30% or 50% of the increased export income 
depending, inter alia , on the activity, value-added and/or ownership, as well as drawbacks 
(sections 3.3.4 and 3.3.5). Several tax and non-tax incentives support, inter alia,  R&D and SME 
activities (sections 3.4.1.3 and 3.4.2). Export lic ensing and export taxes on principal commodities 
(agricultural, industrial) continue to divert supply of these inputs to the domestic market, leading 
to downward pressure on domestic prices and thus acting as an implicit subsidy for the domestic processing industries (sections 3.3.2 and 3.3.3).  
4.6.1  Automotive industry 
4.57.  During the period under review, Malaysian automobile producers continued to be sheltered 
from foreign competition by both tariff and no n-tariff measures, and benefited from domestic 
support measures allowing the market to be dominated by locally made cars. In 2012, Malaysia 
was the world's 23
rd largest car producer, just behind Italy and Poland, and the third largest 
producer and automotive market in ASEAN.108 The industry consists of 11 motor vehicle 
manufacturers, 9 motorcycle manufacturers and more than 800 parts and components 
manufacturers. In 2012, the Malaysian firms Perodu a and Proton dominated the domestic market, 
although with relatively reduced shares of 30. 1% and 22.5%, respectively; in 2008 they jointly 
accounted for 62.4% of vehicles sold. Among the foreign companies operating in Malaysia, Toyota (16.8%) outperformed its two other major non-national peers (Nissan (5.8%), Honda (5.6%)). 
Other foreign car manufacturers (e.g. Volkswag en (a newcomer, see below), Hyundai-Inokom, 
Mitsubishi, Isuzu, and Suzuki) shared the remaining 19.2% of the market.
109 Domestic 
production/assembly of motor vehicles was 567,715 units in 2010, 533,515 units in 2011, 
                                               
105 Factors that influence the share of domestic value added in exports include the size of the economy, 
the composition of exports and position in GVCs, and th e economic structure and export model of the country 
(UNCTAD, 2013a; and Banga, 2013). 
106 These are: electrical and electronics, medica l devices, textiles and apparel, machinery and 
equipment, metals, transport equipment, petrochemica ls, pharmaceuticals, wood-based, rubber-based, oil 
palm-based, and food processing activities (MITI online information, "Third Industri al Master Plan (IMP3)". 
Viewed at: http://www.miti.gov.my/cms/content.jsp?id=com.tms.cms.section.Section_8ab58e8f-7f000010-
72f772f7-dbf00272 ). 
107 Non- ad valorem  specific duties apply to 55 lines at the HS  9-digit level for manufacturing imports.  
108 International Organisation of Motor Vehicle Manufacturers online information. Viewed at: 
http://oica.net/category/production-statistics/ ; and Malaysia Automotive Institute (2013). 
109 Malaysia Automotive Institute (2013); and WTO document WT/TPR/S/225/Rev.1, 15 February 2010. WT/TPR/S/292 • Malaysia 
 
- 100 - 
 
  and 569,620 units in 2012, of which 89.5% (2012) were passenger cars.110 The local content of 
"national cars" of all ranges seems to average between 50%-90% (Proton) and 35-80% (Perodua), while the percentage of local content in domestically assembled foreign cars of all ranges is 35-65%.
111 In 2012, vehicle imports (HS87) were five times lower than exports; motor 
cars (HS8703) and parts (HS8708) represented 41 .2% and 28.9% of the industry's imports in 
2012 respectively, while their export shares were 13.1% and 48%.112 Major export markets for 
cars and/or parts are Thailand and Indonesia, an d main suppliers Japan, Thailand, and Germany. 
Automotive firms are the biggest R&D spenders in Malaysia, although their spending is considered 
low for them to compete with foreign counterparts.113 Despite the sale of Khazanah Nasional's 
42.7% shares of Proton to the Malaysian DRB-HICOM conglomerate with extensive ties to government entities and the country's largest vehicle distributor in 2012, GLCs remain directly or 
indirectly involved in automotive activities
114, including the highly concentrated distribution 
market.115 According to the authorities, there is minimal involvement of several GLCs in 
automotive activities, and Proton and Perodua are majority-owned by the private sector.  
4.58.  Malaysia's 2006 National Automotive Policy (NAP), which was reviewed in 2009, aims at 
inter alia : ensuring the development, long-term competitiveness, and capability of the domestic 
automotive industry as a result of market liberalization; creating a conducive environment to 
attract new investment and expand existing opportunities; enhancing the competitiveness of the 
"national car" manufacturers through strategi c partnerships; developing high-value-added 
manufacturing activities in niche areas; and enhancing bumiputera  participation.116 Foreign 
investment is welcome and 100% foreign equity is allowed. The NAP seems to distinguish between 
"national" cars, (i.e.  meeting the relevant mandatory qualifying requirements) and "non-national" 
cars, which include vehicles assembled in Malaysia by foreign companies.117 Under the NAP 2009, 
contract assembly (of "non-national" cars") is allowed to use existing excess capacity on condition 
that the models do not compete directly with "national" vehicles. New border and domestic support 
measures (see below) became effective from 1 January 2010 under the 2009 NAP review, which is claimed to have taken into consideration Malaysia's commitments under both WTO and ASEAN. 
Under the NAP 2013 review, the main objective is to  improve implementation of measures outlined 
in the NAP 2006 and 2009 as well as to meet the latest global challenges and requirements. NAP 2013 is also aimed at turning Malaysia into a hub for energy-efficient vehicle (EEV) production through strategic FDI and DDI, in line with the aspiration of becoming a regional leader in the 
green automotive industry. No more information on the 2013 NAP review was available with the 
authorities by November 2013.  
4.59.  The industry continues to benefit from the various tax and non-tax incentives available to 
other economic activities (section 4.6). As from January 2010, a freeze was lifted on new 
manufacturing licences for luxury passenger vehicl es (engine capacity of 1,800 cc and above) and 
on-the-road price not less than RM 150,000; hybrid and electric vehicles; pickup trucks; 
                                               
110 Malaysia Automotive Association online data. Viewed at: 
http://www.maa.org.my/info_summary.htm . 
111 DE International (2012).  
112 UNSD Comtrade database. 
113 OECD (2013a), "Malaysia: innovation profile".  
114 Attempts in recent years to sell (parts of) Pr oton to foreign investors have floundered. Khazanah 
Nasional, has a substantial stake in CIMB Group, on e of the largest shareholders of DRB HICOM. The 
Government also maintains an investment position in UMW Holdings, which is another significant investor in Proton. The Government also mainta ins an investment position in UMW Holdings which is a significant 
shareholder in Perodua (38% of shar es). Honda Malaysia Sdn. Bhd. is a joint venture between Honda Motor 
Co. Ltd. of Japan (51%), DRB-HICOM Berhad (34%), and Oriental Holdings Berhad (15%). BMW Malaysia Sdn. 
Bhd is a joint venture with Sime Darby Group, a GLC in volved in agriculture activi ties too (section 4.2.1). 
Mercedes-Benz Malaysia has a joint assembly operation with DRB-HICOM. Volkswagen has also been offering 
CKD and CBU models through its domestic partner DRB- HICOM (Malaysian Investment  Development Authority, 
2012; Khazanah Nasional online information. Viewed at: http://www.khazanah.com/portfolio.htm#com4 ; 
Perodua online information. Viewed at: http://www.perodua.com.my/corporate/company ; Menon and Ng, 
2013; EIU, 2012a; and DRB-Himcom, 2012). 
115 The distribution market of CB Us (completely built-up units) is dominated by a few big local 
companies: the GLC Sime Darby (section 4.2.1), DR B-HICOM, Naza Motor Trading, and Cycle & Carriage 
Bintang Bhd. National car manufacturers appoint one or more companies to act as a distributor for them, while 
foreign carmakers choose different means to distribute their automobiles (DE International, 2012). 
116 Ministry of International Trade an d Industry Media Release, "Review of National Automotive Policy", 
28 October 2009. Viewed at: http://www.maa.org.my/pdf/MEDIA_RELEASE_NAP_Media_281009.pdf .  
117 USTR (2013). WT/TPR/S/292 • Malaysia 
 
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  commercial vehicles; and motorcycles with engine capacity of 200 cc and above.118 However, the 
freeze was maintained on manufacturing licences for reconditioning and reassembling activities.119 
To improve the competitiveness of parts and component manufacturers and to enhance their 
contribution to the automotive industry and economy, the Automotive Development Fund (ADF) 
and Industrial Adjustment Fund (IAF) continued to provide them with soft loans/grants.120 No 
information on the terms of concessional loans and grants, or their allocation (by beneficiary) or the budgetary cost of ADF and IAF support sinc e 2010 was available from the authorities. As 
from 2012, individual taxi operators (1 Malaysia People's Taxis programme) and car-rental 
companies are, inter alia,  exempt from excise duties and bene fit from soft loans for the purchase 
of locally produced "national cars" (section 3.4.1.1 and 4.7.6), while tour operators benefit from 50% reduction on excise duties for locally assembled four-wheel-drive vehicles; no 
information on the budgetary cost of this measure was available from the authorities.
121 Fuel 
subsidies (section 4.5.1) still favour the use of pr ivate vehicles rather than public transport. The 
gradual introduction of a Vehicle End of Life Policy, which was called off under NAP 2009, is under 
consideration under NAP 2013; vehicles above 15 years old could have to undergo mandatory 
inspection during road tax renewal.  
4.60.  During the period under review the automo tive sector benefited from average applied MFN 
tariff protection of 17.3% (Table A3.1) the highest of all HS sections. Tariffs ranged from zero 
to 50%. The tariff regime prioritizes local asse mbly, as much higher duties are charged on 
completely built up vehicles (30%) and completely knocked down vehicles (10%). Under ATIGA (section 2.4.2.1) tariff protection for the industry was reduced to zero as of May 2010. High excise 
duty rates ranging from 60% to 105%, and a 10% sales tax affect both CBUs and CKDs, except 
for commercial vehicles, for which excise duties are nil (section 3.4.1). The tax structure ensures that small and medium-sized cars (mostly locally produced) are taxed less than larger vehicles 
(mostly imported).
122 A gazetted price system remains in place to assist Customs to determine the 
dutiable value of new CBU automobiles (under NAP 2006) and used (under the NAP 2009, since 1 June 2010) (section 3.2.1.2).
123 This system seems to be used to raise the price of imported 
vehicles so that it is substantially higher than that of domestically produced autos.124 The 
restrictive and allegedly non-transparent import lice nsing system of "approved permits" (AP) is to 
be terminated on 31 December 2015 for open APs for used vehicles, and 31 December 2020 for franchise Aps, although there are concerns about whether these new deadlines will be met 
(section 3.2.3).
125 The termination of APs is to provide a clear roadmap and an interim period for 
                                               
118 This change led, inter alia,  to the signing of an agreement for lo cal vehicle assembly and distribution 
of CKD and CBU models between Volkswagen and DRB- HICOM in December 2010. The production roll-out at 
DRB-HICOM Automotive Complex started in November 2011, cars were planned to be available in 2012. In collaboration with DRB-HICOM, Volkswagen aims to increase its 1% share (in 2011) of the Malaysian passenger car market 10-fold (DE International, 2012).  
119 DE International (2012). 
120 On 16 December 2009, Malaysia's fiscal stimulus package set aside US$56 million for the ADF 
(Kuala Lumpur Post , 10 October 2012. Viewed at: http://www.kualalumpurpost.net/cost-of-living-in-malaysia/ ; 
and Ministry of International Trade and Industry Media Release, "Review of National Automotive Policy", 
28 October 2009. Viewed at: http://www.maa.org.my/pdf/MEDIA_RELEASE_NAP_Media_281009.pdf ). 
121 National News Agency online info rmation, "Courteous taxi drivers wi ll lure more tourists to visit 
Malaysia", 18 July 2013. Viewed at: http://www.bernama.com.my/bernama/v7/wn/newsworld.php?id=964476 ; and PM Office online information, 
"Taxi Permit Recipients to get RM5,000 grant to buy proton exora", 24 March 2013. Viewed at: 
http://www.pmo.gov.my/index.php?menu=newslist&news_id=11236&news_cat=13&cl=1&page=1731&sort_y
ear=&sort_month =. 
122 Istituto nazionale per il Commercio Estero (2012).  
123 According to the authorities these measures are to  pave the way for a more competitive automotive 
industry for domestic, region al, and global markets. They consider th at the gazetted price system is not a 
non-tariff barrier (NTB) but a measure to assist the Customs Department to determine value of any dutiable 
vehicle for the purpose of payment of levies and customs duties. 
124 Ministry of International Trade an d Industry Media Release, "Review of National Automotive Policy", 
28 October 2009. Viewed at: http://www.maa.org.my/pdf/MEDIA_RELEASE_NAP_Media_281009.pdf ; and 
USTR (2013). 
125 Franchise APs are given out for free to franchise ho lders of car brands registered with MITI. Open 
APs (commercial, passenger, and motorcycles) are sold to parallel importers at RM 10,000 apiece to import 
cars of any brand. The total number of APs issued each year is capped  at 10% of the number of locally 
assembled cars in the preceding year. Sixty per cent of APs are given to bumiputera  Open AP holders while the 
remaining 40% are given to 'qualified' franchise holders, the majority of which are bumiputera -owned. The 
previous NAP called for the phase-out of the AP policy in 2010; however the 2009 revision extended the AP 
policy to 2020 (LLD online information, "Malaysia's Open-AP System Likely To Remain Beyond 2015", 9 July 2013. Viewed at: http://www.livelifedrive.com/malaysia/news/view/3876/malaysias-open-ap-system-WT/TPR/S/292 • Malaysia 
 
- 102 - 
 
  AP holders to diversify and venture into other businesses.  As from June 2011, imports of used 
parts/components have been prohibited, and imports of used commercial vehicles are to be prohibited from 2016 onwards in line with the NAP 2009, to ensure consumer safety and environmental protection.
126 A vehicle type-approval (VTA) process has prevented the import and 
sale of "sub-standard" vehicles, parts, and components since January 2009. The tax exemption on 
statutory income for manufacturers in the automotive industry was enhanced in 2010: from 10% to 30% of the value of increased exports provided  the vehicles and parts/components attain at 
least 30% value added; and from 15% to 50% of th e value of increased exports provided that the 
goods attain at least 50% value added.
127  
4.7  Services  4.7.1  Introduction 
4.61.  The Malaysian services sector remains a very dynamic segment of the economy, with 
annual growth averaging 5.9% over 2009-12. It  accounted for 50.4% of GDP in 2012 and 53.5% 
of employment (Table 1.2). Malaysia's objective is for services' GDP contribution to increase to 
65% by 2020.
128 The services sector attracted the biggest share of approved investments into the 
economy in 2012, amounting to RM 117.6 billion; nearly 90% of these investments were from domestic sources.
129 FDI into the services sector has been most heavily concentrated in the 
finance and insurance subsectors (Chart 1.3). Malaysia's trade in services was in surplus in 2009, 
but thereafter has posted a steadily increasing deficit (Table 1.3).  
4.62.  Over the review period, the Government continued to autonomously liberalize foreign equity 
restrictions in a swathe of services sectors, considering this to be one of the major reform efforts 
that will drive economic competitiveness and attract FDI. In 2012, the Government commenced 
implementation of partial or complete lifting of foreign equity restrictions in 17 services subsectors under six sectors (professional services; communications services; distribution services; 
educational services; environmental services; and health related and social services), and 
formalized the market-access status quo in accountancy services where full foreign equity participation was already permitted (Box 4.1). This initiative follows an autonomous liberalization 
effort announced in 2009, which was reported on in Malaysia's previous Review. Various sectors 
have been liberalized since 2009 and new foreign equity thresholds have been imposed or are soon to be implemented (Table A4.2). The Malaysia Services Development Council (MSDC) is charged with monitoring the implementation of services liberalization. The MSDC is chaired by the 
Minister of International Trade and Industry and comprises representatives from the relevant 
government ministries, PEMUDAH, PEMANDU, and the private sector. 
Box 4.1 Services liberalization, 2010-13 
1. Professional services  
Accounting (including audit) and taxation services:  formalization of 100% foreign equity 
participation (see section 4.5.7.1). 
Legal services:  a new Legal Profession (Amendment) Act 2012 has been gazetted but has yet to 
enter into operation. It will replace a prohibition on foreign ownership of law firms and on the 
practice of law by foreign lawyers with the possibility for: foreign law firms to enter into 
international partnerships; foreign law firms to establish in Malaysia; and foreign lawyers to be 
employed by Malaysian law firms. Licences granted may be subject to conditions as determined by 
the Bar Council (see section 4.7.7.2). 
                                                                                                                                               
likely-to-remain-beyond-2015 ; Ministry of International Trade and Industry Media Release, "Review of National 
Automotive Policy", 28 October 2009. Viewed at: 
http://www.maa.org.my/pdf/MEDIA_RELEASE_NAP_Media_281009.pdf ; and Istituto nazionale per il 
Commercio Estero, 2012).  
126 WTO document WT/TPR/S/225/Rev.1, 15 February 2010. 
127 Ministry of International Trade an d Industry Media Release, "Review of National Automotive Policy", 
28 October 2009. Viewed at: http://www.maa.org.my/pdf/MEDIA_RELEASE_NAP_Media_281009.pdf .  
128 MITI online information. Viewed at: http://myservices.miti.gov.my/web/guest/home . 
129 MITI (2013). WT/TPR/S/292 • Malaysia 
 
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  Architectural services:  architectural services will be autonomously liberalized once the 
Architects Act 1967 has been amended. With the amendments, 100% foreign ownership of 
architectural firms will be permitted (up from 30% under the 1967 Act), and citizenship and 
residency requirements will be relaxed (see section 4.7.7.3). 
Engineering Services:  engineering services will be autonomously liberalized once the the 
Registration of Engineers Act, 1967 has been amended. With the amendments, 100% foreign 
ownership of engineering firms will be perm itted (up from 30% under the 1967 Act), and 
citizenship and residency requirements will be relaxed (see section 4.7.7.4). 
Quantity Surveying Services: quantity surveying services will be autonomously liberalized once 
the Registration of quantity surveyor's Act 1967 has been amended. With the amendments, 100% 
foreign ownership of quantity surveying practi ces will be permitted (up from 30% under the 
1967 Act), and citizenship requirements will be relaxed (see section 4.7.7.5). 
2. Communication services 
Since November 2012, 100% foreign equity participation has been allowed for courier services. 
Previously foreign equity caps for this subsector were unspecified. FDI was dealt with on a 
case-by-case basis with 100% foreign equity generally being allowed. With respect to 
telecommunication services, 100% foreign equity participation is permitted for application service 
providers (up from 40%) and 70% for network serv ice providers and network facilities providers 
(up from 30%). Provision of all of these services is subject to licensing requirements and other 
requirements combined in the Communications and Multimedia Act 1998 (section 4.7.3). 
3. Distribution services  
Since 2012, Malaysia has allowed 100% foreign ownership of department and speciality stores. 
Department stores must reserve at least 30% of their shelf space for goods made by 
bumiputera -owned SMEs. 
4. Educational services  
Since 2012, 100% foreign ownership of private universities has been permitted (up from 51% 
previously) and is subject to two conditions: that it applies only to private higher educational 
institutions with university status; and that the institution must attract at least 30% of 
international students within five years of co mmencing operations. Up until 2015, foreign private 
higher educational institutions intending to set up private universities in Malaysia must be in the 
top 100 in international rankings. 100% foreign ownership of skills training centres has been 
permitted since 2012. International schools have also been permitted to 100% foreign ownership 
since 2012 (up from 20%). Since 2012, 100% foreign ownership has been permitted in vocational 
and technical secondary schools and vocational and technical secondary schools for students with 
special needs. These schools were new categories introduced under the autonomous commitment. 
5. Environmental services  
Since January 2012, 100% foreign equity has been allowed in the provision of incineration 
services. Information was not available on the previous foreign ownership threshold applied or on 
any other conditions imposed. 
6. Health-related and social services  
Since 2012, 100% foreign ownership of dental an d medical specialist clinics established in 
Malaysia has been permitted. Previously, foreign ownership of dental and medical specialist clinics 
was not allowed. Foreign dental and medical specialists may apply to practice in Malaysia, through 
their employer, to the Malaysian Dental Council or the Malaysian Medical Council, respectively. 
They also must be credentialed and registered as a specialist with the National Specialist Register. 
Foreign dental and medical specialists may only work in private hospitals. 
Source: MIDA online information. Viewed at: 
http://www.mida.gov.my/env3/uploads/Publicatio ns_pdf/Malaysia_Investme ntinTheServicesSector/
2012; USTR online information. Viewed at: 
http://www.ustr.gov/sites/default/files/2013%20NTE.pdf ; and information provided by the 
Malaysian authorities.  
4.63.  The Government's current policy objectives for the services sector are included in the 
10th Malaysia Plan (2011-2015) (see Chapter 2). It emphasizes the need to press ahead with WT/TPR/S/292 • Malaysia 
 
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  services liberalization both autonomously and through bilateral, regional, and multilateral trade 
negotiations. It foresees a changing role for the Government in the provision of public services in the country: from building and operating public services to purchasing them from the private sector. It also sets out the Government's intention to review policies and regulations inhibiting 
services liberalization (such as foreign equity limits and restrictions on employment of foreign 
labour), requirements for commercial presence, composition of boards of directors, and residency for expatriates. Twelve National Key Economic Ar eas (NKEAs) are designated under the Plan which 
are the sectors/geographical area considered to have the greatest potential for generating 
economic growth. Seven of these NKEAs are services sectors: financial services; wholesale and retail trade; tourism; education services; business services; communication contents and infrastructure; and private healthcare. These NKEAs have been allocated specific targets and 
concrete actions.  
4.64.  In 2012, the Government embarked on a study to formulate a Services Sector Blueprint, 
which will serve as an input into the 11
th Malaysia Plan (2015 to 2020). According to the 
authorities, the Blueprint will be aimed at transf orming the services sector and accelerating its 
growth. Focus will be given to developing more knowledge-intensive and higher-value-added sectors through reforms to targeted services sectors and the acceleration of internationalization of 
services providers. An action plan to implement the Blueprint is also being prepared. In 2012, the 
Government also commissioned a study on domestic  regulations for the services sector, covering 
healthcare travel, private higher education, technical and vocational education and training, and environmental services. As at October 2013 the study had yet to be finalized. However, the 
authorities indicated that its main objective is to streamline regulatory regimes in the four areas 
and to identify possible improvements.  
4.65.  Malaysia has undertaken services commitments in almost all of the RTAs to which it is a 
party.
130 In all cases, services commitments are scheduled following a positive list approach. 
Since 2010, four new RTAs incorporating services commitments have entered into force (ASEAN-Australia-New Zealand, Malaysia-India, Malaysia-Australia, and Malaysia-New Zealand). At 
the ASEAN level a new round of services negotiations was completed and entered into force 
in 2010; the 8
th Package of Commitments under the ASEAN Framework Agreement on Services 
(AFAS). Additionally, a Protocol to implement the Fifth Package of Commitments on Financial Services under the AFAS was adopted in 2011.
131 The coverage of services sectors under the RTAs 
goes well beyond the GATS coverage (Table 4.5). 
Table 4.5 Services commitments in Malaysia's trade agreements, 2013 
Service sector WTO  ASEAN Malaysia bilateral FTAs GATS 
AFAS 
ASEAN-
Korea  
ASEAN-
China  
ASEAN-
AUS/NZ  
Japan 
Pakistan  
New 
Zealand  
India  
Australia  
Business services ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 
Communication services ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 
Construction and related 
engineering services ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 
Distribution services  ■ ■    ■  ■  
Education services  ■ ■ ■ ■ ■ ■ ■ ■ ■ 
Environmental services  ■      ■ ■ ■ 
Financial services ■ ■ ■ ■ ■ ■ ■ ■  ■ 
Health related and social services ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 
Tourism and travel related 
services  ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 
Recreational cultural and sporting 
services ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 
                                               
130 The RTAs that do not include services commitments are ASEAN's RTAs with India and Japan, and 
Malaysia's RTA with Chile.  
131 ASEAN online information. Viewed at: http://www.asean.org/communities/asean-economic-
community/item/protocol-to-implement-the-eighth-package-of-commitments-under-the-asean-framework-
agreement-on-services . WT/TPR/S/292 • Malaysia 
 
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  Service sector WTO  ASEAN Malaysia bilateral FTAs GATS 
AFAS 
ASEAN-
Korea  
ASEAN-
China  
ASEAN-
AUS/NZ  
Japan 
Pakistan  
New 
Zealand  
India  
Australia  
Transport services  ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 
Other services ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ 
Source: WTO document GATS/SC/52, 15 April 1994; and WTO RTA database ( http://rtais.wto.org ). 
4.66.  Since 2010, there have been changes to Malaysia's financial services legislation 
(see Table A4.3 and section 4.5.2 below). The consum ption of certain services is subject to a 6% 
services tax (section 3.4.1.1); this will be replaced by the GST upon its introduction in 2015. 
4.7.2  Financial Services 
4.7.2.1  Introduction 4.67.  The Malaysian financial services sector provides a series of banking, insurance, 
asset-management, and capital-market services. Th e sector's total assets exceeded 400% of GDP 
at end 2012. In asset terms, the sector is dominated by banking institutions (Chart 4.1).  
Chart 4.1 Structure of the financ ial sector, by asset share, 2012 
Development financial 
institutions
5.6%Banking institutions
48.8%
Labuan International Business 
& Financial Centre
7.0%Insurance companies
5.5%Pension & provident fund
16.9%Fund management
12.9%Other non-bank financial 
institutions
3.2%
 
Source: Data provided by the Malaysian authorities.  
4.68.  As reported by the IMF, the Malaysian financial sector has weathered the global financial 
crisis well; banking institutions are well capitalized, merger activity has resulted in strengthened 
banks and other financial sector institutions, and financial services supervisory regimes are well developed and highly compliant with international standards.
132 In 2012, finance and insurance 
contributed 7.5% to GDP (current prices). The sector as a whole has witnessed strong growth 
since 2010, with year-on-year growth ranging from 4.4% to 8.2% of GDP (Table 1.2). Nevertheless, Malaysia's central bank, the Bank Negara Malaysia (BNM) is conscious of the need to manage what it perceives as the main potential risks to financial stability: ensuring that household 
debt levels are sustainable (household debt reached 80.5% of GDP at end 2012) and managing 
the risks of contagion as the Malaysian financial services sector becomes more regionally and internationally integrated. In this regard, th e BNM has implemented a number of pre-emptive 
measures to avoid such problems from materializing.
133  
                                               
132 IMF (2013c).  
133 To tackle possible problems relating to household debt, BNM has created a credit information registry 
allowing banks to assess the credit -worthiness of borrowers; it has deve loped a targeted financial education 
programme for new and young borrowers; and a debt reso lution and counselling mechanism to facilitate the 
orderly management of potential financial problems  among households. Additionally, bank supervisory WT/TPR/S/292 • Malaysia 
 
- 106 - 
 
  4.69.  BNM is responsible for supervising commercial and Islamic banking institutions, the major 
development financial institutions (DFIs), insurance companies, and takaful (Islamic) operators. The Securities Commission (SC) supervises and regulates capital market intermediaries, which are fund management companies, broker-dealers, an d the securities and derivatives market. For 
investment banks, the entities are supervised and regulated by the BNM and the SC. The Labuan 
International Business and Financial Centre is supervised by the Labuan Financial Services Authority (LFSA).  
4.70.  Over the review period, there has been a comprehensive modernization and streamlining of 
Malaysia's onshore and offshore financial services legislation, affecting both the banking and insurance sectors. Two new laws entered into force in June 2013: the Financial Services Act (FSA) 2013, and the Islamic Financial Services Act (IFSA) 2013.
134 Additionally, the Central Bank 
of Malaysia Act of 2009 was amended in 2013 as part  of the broader review of financial sector 
legislation completed during the year. The FSA, IFSA, and Central Bank of Malaysia Act are intended to provide a more uniform framework for financial sector regulation and give the BNM the 
necessary powers to act effectively in a more complex financial landscape.
135 Key features of the 
new legislation include: greater clarity and transp arency in the implementation and administration 
of the law; a focus on Sharia compliance and governance in the Islamic financial sector; provisions 
for differentiated regulatory requirements that reflect the nature of financial intermediation 
activities and their risks to the overall financial system; provisions to regulate financial holding companies and non-regulated entities; strengthened business conduct and consumer protection requirements; as well as strengthened provisions for effective and early enforcement and 
supervisory intervention. As legislated in the FSA and IFSA, policy on investment in the financial 
sector (encompassing the banking, insurance, and takaful sectors) is based on prudential and the 
best interest of Malaysia criteria. Under the FSA and IFSA, the factors to be considered in 
determining whether an application is in the best interest of Malaysia are: (a) the effect of the 
investment on the level and nature of economic activity in Malaysia, including the effect on productivity, efficiency, and quality of financial services; (b) the contribution towards enhancing 
international trade and investment linkages between Malaysia and other countries; (c) the effect of 
the investment on the stability of the financial system, including on contact and behaviour that could pose a risk to the financial system; and (d ) the degree and significance of participation of 
Malaysians in the financial sector.
136 The enactment of the FSA and IFSA also gave effect to a set 
of foreign exchange liberalization measures, announced in March 2013, which aim to enhance the 
competitiveness of the economy and further develop the domestic financial market (see section 1.4.1). The Labuan Financial Services and Securities Act and the Labuan Islamic Financial 
Services and Services Act were enacted in 2010 (see below).  
4.71.  A new Malaysia Deposit Insurance Corporation Act was enacted in 2011, replacing 
legislation from 2005. The previous law provided for compulsory deposit insurance for all 
deposit-taking banks through the Malaysia Depo sit Insurance Corporation (PIDM). The new law 
provides for a wider financial safety net that includes a takaful and insurance benefit protection system and provides the Minister of Finance with powers to extend protection coverage beyond the scope of normal protection for deposits as well as takaful and insurance benefits, for the purpose 
of safeguarding the stability of the financial system . At the time of Malaysia's previous Review, and 
as part of the pre-emptive measures taken in response to the global financial crisis, the PIDM provided for temporary additional depositor prot ection over and above the explicit limit of 
RM 60,000 per depositor per member institution to a full guarantee for eligible bank deposits until 
December 2010.
137 With the lapse of the temporary fu ll guarantee and improved market 
conditions, deposit insurance coverage was set at RM 250,000 per depositor per member 
institution, effective 1 January 2011. The IMF has noted that while the deposit insurance 
framework largely conforms to best international practice, reserves are only sufficient for pay-outs 
                                                                                                                                               
assessments have made bank underwriting and risk mana gement practices more robu st. In order to detect 
nascent financial sector risks, the BNM is participatin g in collaborative initiatives with other supervisory 
institutions in the region. For more information, see BNM (2013a). 
134 The laws that were repealed were: the Banking and Financial Institutions Act (1989); the Islamic 
Banking Act 1983; the Insurance Act 1996; the Takaful Act 1984; the Payment Systems Act 2003; and the Exchange Control Act 1953. 
135 BNM (2013b). 
136 FSA (Schedule 5, Part 1), and IFSA (Schedule 5, Part 1). Viewed at: 
http://www.bnm.gov.my/index.ph p?ch=en_legislation&lang=en .   
137 For more information on coverage, see PIDM online information. Viewed at: 
http://www.pidm.gov.my/About-Deposit-Insurance/Coverage.aspx . WT/TPR/S/292 • Malaysia 
 
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  to smaller banks. It has recommended that a ba ck-up funding agreement with the Ministry of 
Finance should be put in place.138 However, the authorities noted that the maximum 
RM 250,000 limit provides for 99% of depositors to be protected in full.139 
4.72.  Malaysia was assessed to have demonstrated a high level of compliance with the Basel Core 
Principles (BCP) for Effective Supervision, by the IMF and World Bank under its Financial Sector 
Assessment Programme in 2013; it was "compliant" or "highly compliant" with all 25 BCPs. It was reported that the BNM had set prudent and appr opriate minimum capital adequacy requirements 
for banks; although it was suggested that the scope  of capital requirements should be widened to 
include financial holding companies.
140 The authorities noted that their compendium of prudential 
requirements and guidance is consistent with international standards and aligned with international regulatory reform initiatives. Its coverage includes risk management, governance, 
and internal controls. 
4.73.  The Government's policies to further strengthen the financial sector are set out in the 
Financial Sector Blueprint 2011-2020 and the Capita l Market Master plan 2 (2011-2020), both of 
which were outlined in the 10
th Malaysia Plan.141 The overarching aim for the financial services 
sector, as reflected in each of these strategies, is for the sector to have a greater role in facilitating and catalysing Malaysia's transformation into a high value-added, high-income economy by 2020.  
4.74.  The Financial Sector Blueprint 2011-20 foresees the financial sector as a key driver of 
economic growth, with its growth being anchored in  that of the real economy. It envisages a more 
competitive, dynamic, inclusive, and integrated financial system, offering a more diverse range of products and services to cater for the requirements of businesses operating in more integrated 
regional and global markets as well as to  meet the needs of a more knowledge- and 
innovation-intensive domestic economy, and those of  higher income customers at the retail level. 
Under the Blueprint there are nine focus areas: (i ) effective intermediation for a high-value-added 
and high-income economy; (ii) developing deep and dynamic financial markets; (iii) financial 
inclusion for greater shared prosperity; (iv) strengthening regional and international financial integration; (v) internationalization of Islamic finance; (vi) regulatory and supervisory regime to 
safeguard the stability of the financial system; (vii) electronic payments for greater economic 
efficiency; (viii) empowering consumers; and (ix)  talent development to support a more dynamic 
financial sector. The Blueprint states that policies on foreign investment in the sector (through the issuance of new licences or the acquisition of significant equity interests in Malaysian financial 
institutions) will be guided by two considerations: prudential criteria, and whether the investment 
is in the best interest of Malaysia. These criteria are also codified in the FSA and IFSA. Factors to be taken into account in determining the best interests of Malaysia are: (a) the effect of the 
foreign investment on economic activity in Malaysia, having particular regard to the contribution of 
the foreign investment in promoting and catalysing new high value-added economic activities, addressing demand for financial services in ar eas where there are gaps; providing high-skilled 
employment opportunities; and contributing to the productivity, efficiency and quality of financial 
services; (b) the extent to which the foreign investor will contribute to enhancing international trade and investment linkages between Malaysia and other parts of the world; (c) the contribution towards the internationalization of Islamic finance and support for Malaysia's evolution as an 
international hub for Islamic finance; (d) the impact the investment will have on financial stability; 
and (e) the degree and significance of Malaysian participation in domestic financial institutions. It considers that the continued presence of strong and well-managed domestic banking groups that 
mobilize more than a 50% share of resident depo sits is important for the growth and development 
of the sector. The Blueprint sets out 69 recommendations and over 200 initiatives to be implemented progressively by 2020.  
4.75.  The Capital Market Master Plan 2 (CMP2) was formulated with the theme of "Growth with 
Governance", and focuses on expanding the role of the capital market to invigorate national 
economic growth while addressing concerns about the efficacy of markets in the aftermath of the 
                                               
138 IMF (2013c). 
139 MIDC Press Release, "New Deposit Insurance Limit at RM 250,000". Viewed at: 
http://www.pidm.gov.my/PIDM-in-the-Media/Press-Releases/New-Deposit-Insurance-Limit-At-
RM250,000.aspx . 
140 IMF (2013a).  
141 Under the 10th Malaysia Plan, financial services is designat ed as an NKEA, with three main targets: to 
develop a new financial sector blueprint, to develo p a new capital market master plan and to enhance 
Malaysia's position in Islamic finance (PM Department, 2010). WT/TPR/S/292 • Malaysia 
 
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  global financial crisis. The CMP2 strategies focus on creating an environment conducive for the 
growth of the private sector and the financing of entrepreneurial and innovative economic activities. Emphasis is also placed on ensuring Malaysia's capital market is well-regulated, with participants strengthening their professional st andards. Prominence is given to social and 
environmental issues, so that investment can be harnessed through the capital market to connect 
communities and businesses that deliver sustainable value creation.
142  
4.7.2.2  Onshore banking 
4.76.  As reported in Malaysia's previous Review, banking services are provided by commercial 
banks, investment banks and Islamic banks. All ba nking licences are granted by the Minister of 
Finance, based upon recommendations made by BNM. As articulated in the Financial Blueprint and legislated in the FSA and IFSA, licences granted to foreign-owned banks are subject to prudential 
and best interest of Malaysia criteria. These criteria entered into effect upon the entry into force of 
the FSA and IFSA on 30 June 2013.  
4.77.  All banking institutions must be locally incorporated in Malaysia. The requirement also 
applies to Islamic Banks, with the exception of International Islamic banks (which may be 
established either as a locally incorporated company or a branch). Locally incorporated foreign-owned commercial banks are allowed to own up to eight branches and ten microfinance 
branches. The authorities highlighted that as articulated in the Financial Sector Blueprint, greater 
flexibility will be accorded to onshore financial inst itutions to establish new delivery channels, while 
promoting greater financial inclusion and wider adoption of electronic payments.  
4.78.  As at August 2013, the total assets of th e banking sector were RM 2,043 billion. The sector 
is dominated by Malaysian-owned institutions, which accounted for 78.6% of the total value of 
banking assets in the same year (Table 4.6). Six new licences have been granted to foreign banks since 2009.  
Table 4.6 Banking instit utions, 2009, 2011, and 2013 
Institution type 2009 2011 2013 (as at October) 
Number Assets 
(RM million) Number Assets 
(RM million) Number Assets 
(RM million) 
Commercial banks 22 1,139,726 23 1,386,980 27 1,566,312 
(of which: foreign) (13) 273,480 (17) (353,323) 19 385,809 
Islamic banks 17 224,938 16 326,841 16 413,475 
(of which: foreign)  (6) 34,695 (6) (42,768) 6 51,870 
International Islamic 
banks 3 .. 5 .. 5 .. 
(of which: foreign) (3)  (5)  (5)  
Investment banks 15 61,542 15 68,042 12 62,947 
(of which: foreign) (0)  (0)  (0)  
Total 54 1,426,206 54 1,781,863  55 2,042,735 
.. Not available. 
Note:  Foreign Islamic banks are foreign-owned banks th at carry on ringgit and non-ringgit Islamic banking 
business, whereas International Islamic banks are foreign-owned banks that conduct Islamic banking business in currencies  other than the ringgit. 
Source: IMF (2013). Viewed at: http://www.imf.org/external/pubs/ft/scr/2013/cr1352.pdf ; and information 
provided by the Malaysian authorities. 
4.79.  According to the authorities, in 2011, Malaysia was the world's third largest market for 
Islamic banking assets, with Malaysian Islamic banks accounting for 12% of global Islamic banking assets. As at October 2013 Malaysian Islamic banking was conducted through 16 Islamic banks (of 
which 6 were foreign owned), and 5 International Islamic banks. Commercial and investment 
banks are permitted to operate an Islamic banking window; 3 commercial banks and 7 investment banks have done so (end 2012).  
4.80.  Broad recommendations are contained in the Financial Sector Blueprint to support the 
growth of Islamic finance domestically while supporting Malaysia's objective of becoming a global 
                                               
142 Securities Commission Malaysia (2011a). WT/TPR/S/292 • Malaysia 
 
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  Islamic finance hub. Malaysia is seeking to establish itself as a global centre for Islamic finance 
through liberal market access for foreign and international Islamic banks, a stronger regulatory framework through the 2013 IFSA, and through various tax and non-tax incentives. For example, foreign Islamic banks are eligible for a stamp duty exemption (until 2016) on Islamic banking 
instruments conducted in foreign currency, and an income tax exemption until 2016. Non-tax 
incentives include no restrictions on the employment of expatriates and border facilitation for these expatriates and their families. Support through tax breaks and grants are also given to 
developing human talent in the area of Islamic finance.
143  
4.7.2.3  Onshore insurance 4.81.  The insurance industry grew rapidly over  the review period. In 2012, the value of total 
insurance premiums in Malaysia was RM 45.8 billion, up from RM 31 billion in 2008. Life insurance 
premiums continue to account for around two thirds of the total (Chart 4.2). Per capita insurance 
expenditure in 2012 was US$514.2, placing Malaysia 38
th in the world (up from 46th in 2008).144 
In 2012, the onshore insurance sector accounted for 5.5% of the total assets of the financial 
sector. 
Chart 4.2 Insurance: total premium volume, 2008-12 
010,00020,00030,00040,00050,000
2008 2009 2010 2011 2012RM million
Non-lifeLife
 
Note: Data are based on financial year, i.e. 2008 covers 1 April 2008 to 31 March 2009. 
Source: Swiss Re (2013),  World Insurance in 2012 . Viewed at: 
http://media.swissre.com/documents/sigma3_2013_en.pdf . 
4.82.  Insurance companies and takaful operators are now governed by the FSA and IFSA, both of 
which entered into force on 30 June 2013 (see above). The new laws provide greater transparency 
and detail on the criteria for market entry, includ ing with respect to prudential requirements. With 
the coming into force of the FSA and IFSA, life and general businesses of insurers, and family and general business of takaful operators must be carried out under separate entities. The FSA and 
IFSA provide for a five year transition period to allow for an orderly segregation of businesses by 
existing composite insurers and takaful operators. Takaful operators must to ensure their aims and operations are Sharia compliant at all times, an d when there is a conflict between shareholders' 
and takaful participants' interests, the Board of the company must give priority to the latter.  
4.83.  To operate in Malaysia, insurance companies must obtain a licence from the Ministry of 
Finance, which are granted upon recommendation fr om the BNM. According to the IMF, no direct 
conventional insurance licence has been granted since the 1970s.
145 The authorities explained that 
this is due to continued efforts to promote consolidation and rationalization, particularly within the 
fragmented general insurance industry, so to create strong general insurers with sufficient capacity and scale to contribute meaningfully to the broa der economy. They further noted that, while no 
new licences have been granted, foreign participation in the insurance industry remains high 
(see below). New reinsurance, takaful, and retakaful licences have been issued from time to time 
                                               
143 For more information, see MIDA online information. Viewed at: 
http://www.mida.gov.my/env3/uploads/IncentivesCompilation/MIFC/2013/AppVI.pdf . 
144 Swiss Re (2013). 
145 IMF (2013c).  WT/TPR/S/292 • Malaysia 
 
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  since the mid-1990s in order to meet specific objectives such as to spur the development of the 
takaful industry and Malaysia's position as an international Islamic financial hub. 
4.84.  The issuance of new licences in the insurance and takaful industry, like in the banking 
sector, is guided by prudential criteria and the best interest of Malaysia criteria (as per the FSA 
and IFSA). All foreign insurance companies must be incorporated in Malaysia. However flexibility is 
accorded to foreign professional reinsurers, retaka ful operators, and international takaful operators 
to operate through a branch office in Malaysia. With the entry into force of the FSA and IFSA, life 
and general businesses of insurers, and family and general business of takaful operators must be 
carried out under separate entities. The FSA and IFSA provide for a five-year transition period to allow for an orderly segregation of businesses by existing composite insurers and takaful operators. 
4.85.  There is significant foreign presence in the Malaysian insurance sector, due to merger and 
acquisition activity. The number of composite and general insurers decreased from 33 in 2008 
to 23 at end 2012. In the takaful sector, four new joint-venture family takaful operators 
commenced operations between 2010 and 2012, increasing the number operating in Malaysia to 
12 at end 2012, up from 8 in 2009 (Table 4.7). 
Table 4.7 Insurance companies, 2012 
 Number Assets (RM million) 
Direct insurance companies 32 198,776 
Life  9 91,274 
(of which foreign)  (4) (75,343) 
General 18 23,076 
(of which foreign) (9) (1,988) 
Life and general 5 84,426 
(of which foreign) (3) (66,598) 
Reinsurance companies 7 7,146 
Life 1 369 
(of which foreign) (0) (0) 
General 5 2,636 
(of which foreign) (3) (1,966) 
Life and general 1 1,988 
(of which foreign) (1) (1,988) 
Islamic (takaful) insurance companies 12 20,400 
Islamic insurers (takaful operators) 12 20,400 
(of which foreign) (3) (350) 
International takaful operators 0 0 
(of which foreign) (0) (0) 
Islamic (takaful) reinsurance companies  4 .. 
Islamic reinsurance (retakaful operators) 4 .. 
(of which foreign) 2 .. 
.. Not available.  
Source: Information provided by BNM. 
4.7.2.4  Labuan (offshore) banking and insurance 
4.86.  The Labuan International Business and Fina nce Centre (LIBFC) is regulated and supervised 
by the Labuan Financial Services Authority (LFSA): banking and insurance services are among the various permitted international economic activities. All activities are carried out only in foreign currencies and predominantly with non-residents. Two new laws entered into force in 2010, 
replacing previous legislation: the Labuan Financ ial Services and Securities Act and the Labuan 
Islamic Financial Services and Securities Act.
146 According to the authorities, the intention of these 
new laws is to bring the LIBFC's regulatory and supervisory standards up to par with international 
standards. 
                                               
146 These laws may be viewed at: http://www.lfsa.gov.my/legislation . WT/TPR/S/292 • Malaysia 
 
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  4.87.  In 2012, the value of the Labuan banking se ctor's total assets was over RM 126 billion, and 
that of insurance was RM 13.9 billion (Table 4.8). 
Table 4.8 Offshore banking and services, 2012 
Institution type Number Assets (RM million) 
Commercial banks: 59 134,341 
(of which:  conventional)  (37) (126,983)  
(of which:  Islamic) (6) (7,358) 
Investment banks  16 1,809  
Insurance companies 203 13,947 
Source:  Information provided by LFSA. 
4.88.  Companies established in the LIBFC may opt to pay either a corporate tax rate of 3% or 
RM 20,000. They are also exempt from withholding tax, stamp duties, and indirect taxes. 
Non-Malaysian employees working in a managerial capacity in a Labuan entity are granted a 50% 
tax exemption on gross employment income.147 
4.7.2.5  Development finance institutions 4.89.  Malaysia also has 13 development financial institutions (DFIs), which are either owned or 
controlled by the Government. In 2012, DFIs made up 5.6% of the financial sector's total assets 
(Chart 4.1). The 2002 Development Finance Institutions Act (DFIA) authorizes the BNM to regulate and supervise six DFIs under the standards applicable to commercial banks.
148 The other DFIs are 
supervised by ministries or government agencies.149 Three of the six DFIs under the BNM's 
purview accept retail deposits, have a large bran ch network, and account for 25.6% of the total 
number of deposit accounts in the banking system.150  
4.90.  The DFIs were established to develop and promote key sectors considered important to the 
development objectives of the country. These sect ors include agriculture, small and medium-sized 
enterprises (SMEs), infrastructure, maritime, export-oriented sectors, capital-intensive sectors, and high-technology industries.
151 As explained by the authorities, DFIs complement the banking 
system by providing financing to the underserved segment. Whilst DFIs lend at market rates for 
financing under their own funds, they also provide financing at favourable rates to targeted groups, particularly entrepreneurs. The special schemes include: Entrepreneur Development Fund 
Scheme; the Special Fund for Tourism; the Fund for Food; the Micro-economic Stimulus Package; 
the Paddy Credit Scheme; the Maritime Fund; the Creative Industry Fund; the Loan for Taxi Owners scheme; and the Rural Economic Financing Scheme. In December 2012, BNM 
strengthened the requirements on DFI financial re porting and disclosures, in order to improve the 
transparency of their performance.
152 Since 2010, it has also issued guidelines to DFIs relating to 
anti-money-laundering and prudential limits and standards.153 
4.91.  In 2012, total lending by all DFIs amounted to RM 119 billion. Around 70% of loans were for 
consumption credit or related to the property sector. Loans directed to agriculture, forestry and 
fisheries totalled RM 7.1 billion; to manufacturing  RM 5.7 billion; and to transport, storage and 
communication RM 5.4 billion.154 
                                               
147 For more information, see MIDA online information. Viewed at: 
http://www.mida.gov.my/env3/uploads/IncentivesCompilation/LFSA/2013/AppV.pdf .  
148 BNM-supervised DFIs are: Bank Pembangunan Mala ysia Berhad; Bank Perusahaan Kecil & Sederhana 
Malaysia Berhad (SME Bank); Export-Import Bank of Malaysia Berhad (EXIM Bank); Bank Kerjasama Rakyat Malaysia Berhad; Bank Simpanan Nasional; and Bank Pertanian Malaysia Berhad (Agrobank). 
149 Ministry-supervised DFIs are: Malaysian Industrial Development Finance Berhad; Credit Guarantee 
Corporation Berhad; Lembaga Tabung Haji; Sabah Deve lopment Bank Berhad; Sabah Credit Corporation; 
Borneo Development Corp. (Sabah) Sdn Bhd; and Borneo Development Corp . (Sarawak) Sdn Bhd. 
150 IMF (2013c). 
151 BNM online information, "Development Financial Institutions". Viewed at: 
http://www.bnm.gov.my/index.php? ch=fs_mfs&pg=fs_mfs_dfi&lang=en . 
152 BNM (2013b). 
153 Guidelines viewed at: 
http://www.bnm.gov.my/index.php?ch=en_reference&pg=en_reference_index&ac=584#dfi . 
154 BNM (2013b).  WT/TPR/S/292 • Malaysia 
 
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  4.7.3  Telecommunications 
4.92.  There were no changes to Malaysia's telecommunications legislation during the review 
period (Table A4.3). The sector is regulated by the Communications and Multimedia Commission (CMC), an agency under the resp onsibility of the Ministry of Communications and Multimedia 
Malaysia (MCMM). There have been no changes to  subsidiary legislation since 2010. Regulatory 
developments since 2010 include the introduction  of new formats for mobile numbers and an 
agreement between Malaysia and Singapore on reduced mobile roaming prices by all operators in 
both countries.
155 
4.93.  In 2011, investment in telecommunications in Malaysia reached nearly RM 5.6 billion, which 
according to the ITU, exceeds the world average. The ITU also notes that the ratio of telecommunications revenues to GDP in Malaysia is among the highest in the world, suggesting 
that the telecommunications sector has made a major contribution to economic growth. Overall, 
Malaysia ranked 51
st out of 161 countries in 2011 in the ITU Information and Communication 
Technology (ICT) Price Basket, which tracks and compares the affordability of ICT services around 
the world. It ranked 59th out of 157 countries in the ITU ICT Development Index, which ranks 
country performance with respect to ICT infrastructure and uptake.156 Information was not 
available about price changes in the telecommunications sector since 2010. 
4.94.  The Malaysian Government still maintains a strong presence in the telecommunications 
sector. It is the majority shareholder of Telekom Malaysia, the former government division for telecommunication services. Telekom Malaysia was privatized in 1987 and sold off its mobile division in 2008; this is now a separate GLC called Axiata.
157 The fixed-line sector continues to be 
dominated by Telekom Malaysia, with a market share of 95%. TIME dotcom Berhad (TIME), which 
is 100% owned by the Government, provides wholesale bandwidth and operates the Cross Peninsular Cable System.
158 Information was not available on the number of fixed and mobile 
telephone providers in Malaysia, the respective mark et share of each of these providers or foreign 
investment in these companies. 
4.95.  Malaysia's mobile telecommunications sector continued to grow rapidly over the review 
period: with mobile subscriptions increasing from 107.9 per 100 inhabitants in 2009 to 140.9 per 
100 inhabitants in 2012. Subscriptions to pre-paid phones account for around three quarters of 
total mobile subscriptions. Fixed-line telephone subscriptions have slightly declined (Table 4.9).159 
According to the CMC, as at October 2013, 62% of households were subscribed to a broadband 
network, mainly through mobile devices. Number portability is allowed for mobile phone 
subscribers (but not fixed-line subscribers). In December 2012, the Communications and Multimedia Commission allocated the necessary mobile spectrum for 4G services to eight 
companies.  
Table 4.9 Selected telecommunication indicators, 2009-12 
 2009 2010 2011 2012 
Fixed telephone subscription s (million) 4.5 4.6 4.5 4.6 
Fixed telephone subscriptions per 100 inhabitants 16.2 16.2 15.7 15.7 
Mobile cellular subscripti ons (million) 30.1 33.9 36.7 41.3 
Mobile subscriptions per 100 inhabitants 107.9 119.2 127.0 140.9 
Source: ITU statistics. Viewed at: http://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx . 
4.96.  Depending on the kind of services they provide, telecommunications companies must obtain 
one of three types of licence in order to operate in  Malaysia: (a) Network Facilities Provider Licence 
(NFP); (b) Network Service Provider Licence (NSP ); or (c) Applications Service Provider Licence 
(ASP) (Table 4.10). Furthermore, within each of these licence categories, two types of licence are 
granted: "individual licences" are granted for certain activities where there is a high need for 
                                               
155 MCMC (2012). 
156 ITU (2013).  
157 Telekom Malaysia (2013). 
158 TIME dotCom Berhad online information,  "Corporate information". Viewed at: 
http://www.time.com.my/aboutus/corporateoverview.asp . 
159 EIU (2013b); and MIDA online inform ation, "Malaysia Investment in the Services Sector". Viewed at: 
http://myservices.miti.gov.my/web/guest/mida . WT/TPR/S/292 • Malaysia 
 
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  regulatory control, and "class licences" are granted where lighter regulation is needed. 
Foreign-owned companies must be incorporated in Malaysia in order to provide any licensed activity. The authorities indicated that licences are generally approved if applicants can meet all the licensing conditions, provide a sound business plan and be in line with national policy 
objectives and interests. Reasons for the denial of a licence application are only given to the 
applicants upon request. 
Table 4.10 Telecommunications licensing regime, 2013 
Licensing category Individual licence Class licence 
Network Facilities Provider 
For owners/providers of 
network facilities infrastructure Earth stations; fixed links and 
cables; radio communications 
transmitters and links; satellite hubs; satellite control stations; space stations; submarine 
cable landing centres; and 
towers, poles ducts, and pits used in conjunction with other 
network facilities Niche or limited purpose 
network facilities 
Network Service Provider 
Providers of the basic 
connectivity and bandwidth, 
enabling connectivity between 
different networks  Bandwidth services; 
broadcasting distribution 
services; cellular mobile 
services; access applications 
services; space services; 
switching services; and 
gateway services Niche customer access; niche 
connection services 
Application Service Provider 
Provision of services to 
end-users, such as voice 
services, data services, and internet access. n.a. PSTN telephony; public cellular 
services; IP telephony; public 
payphone services; public 
switched data services; audiotext hosting services 
provided on an opt-in basis; 
directory services; internet access services; and messaging services 
n.a. Not applicable. 
Source:  MIDA Information and Comm unication Technology. Viewed at: 
http://www.mida.gov.my/env3/uploads/Publicatio ns_pdf/Malaysia_Investme ntinTheServicesSector/
2012/06%20ICT.pdf . 
4.97.  In 2012, foreign equity thresholds for licence holders were increased as part of a broader 
autonomous services liberalization package (see Section 4.5.1). For NSPs and NFPs it was 
increased from 30% to 70%, and for ASPs from 49% to 100% (see also Table A4.2).160 As a result 
of autonomous liberalization measures, Malaysia's applied regime for telecommunications services, is significantly more open than its commitments undertaken under the GATS and its RTAs.
161 
4.98.  As noted in Malaysia's previous Review, retail prices for fixed line services are regulated by 
the Government through the Communications and Multimedia (Rates) Rules 2002. Under the rules, maximum prices are set below which companies are free to set their tariffs; these ceilings have 
not been changed since 2002. Retail rates for mobile phones are not regulated.  
4.99.  Malaysia's Universal Service Provision programme is regulated under the Communication 
and Multimedia Act (CMA) 1998. Its objective is to provide collective and individual access to basic 
telephony and internet access throughout the country. The USP Fund was established under 
Section 204 of the CMA into which telecommunication s operators contribute a percentage of their 
revenue. The fund is used to cons truct telecommunications facilities. 
                                               
160 MITI online information. Viewed at: http://myservices.miti.gov.my/web/guest/communication . 
161 For a summary of Malaysia's mode 3 FDI restrictions under th e GATS and RTAs for 
telecommunications services, see: 
http://www.mida.gov.my/env3/uploads/Publications_pdf/Malaysia_InvestmentinTheServicesSector/2012/06%
20ICT.pdf . WT/TPR/S/292 • Malaysia 
 
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  4.100.  The authorities reported that, in general there are no incentives made available to the 
telecommunications companies. 
4.7.4  Air Transport 4.7.4.1  Institutional and regulatory structure 
4.101.  The MOT formulates plans and reviews policies relating to air services and is responsible 
for granting licences to aviation personnel, air service providers, airport operators, and 
maintenance suppliers. The Department of Civil Av iation (DCA) under the Ministry of Transport 
(MOT) regulates the aviation sector. It is responsible for providing air traffic services, enforcing 
airport standards, planning and supervising the development of air traffic control systems, and airport facilities.
162 There have been no changes to the laws governing the air transport sector 
since Malaysia's previous Review (Table A4.3). 
4.102.  Malaysia has three main strategies for the air transport sector: to develop a network of 
modern airports that meet international standards; to promote an open skies aviation policy; and to develop Kuala Lumpur International Airport (KLIA) as a hub for passenger and cargo transport. 
As announced in the 2014 Budget Speech, the Government intends to formulate a national 
aviation policy that would outline measures to strengthen the industry.  
4.7.4.2  Airports and ground handling services 
4.103.  Malaysia has 6 international airports and 16 airports serving domestic flights. All airports 
are owned by the Federal Government. Malaysia Aiports Holdings Berhad, a GLC, manages all but the Senai International Airport. The Senai International Airport is managed by Senai Airports Terminal Services Sdn Bhd, a private, Malaysia n-owned company, under a concession agreement 
with the Federal Government.  
4.104.  In 2012, air passenger traffic reached 68.5 million, of which 52.2% was domestic, and 
47.8%  international.
163 Information was not available on the volume and value of exports 
transported by air. KLIA is Malaysia's main airport, accounting for 58.2% of total passenger 
transport and 75.4% of total cargo transport.  
4.105.  The government has made significant infrastructural investments, mainly to facilitate 
low-cost air transportation. These investments include a new low cost carrier terminal (LCCT) at 
KLIA to handle more capacity and the construction of another LCCT site in the Kuala Lumpur area.
164 Additionally, the Government announced its intention to upgrade air traffic control systems 
at KLIA and Subang airports and to upgrade the facilities in several others.165 Various incentives 
are offered to encourage new airlines to provide services to Malaysia, and to encourage existing 
airlines to expand the services offered and provid e services to new routes. These include incentive 
payments relating to passenger volumes and free landing and office rental for a fixed period. 
4.106.  Foreign participation is not permitted in the ground-handling market in Malaysia.  
4.7.4.3  Airlines and air services agreements 4.107.  Malaysia has eight domestically licensed providers of scheduled air services (Table 4.11). 
The industry regulator is responsible for setting foreign equity ceilings for domestic airline 
companies: these are now set by the Ministry of Transport and the threshold rate is 49%. 
4.108.  Cabotage is restricted to domestically licenced air carriers through the non-inclusion of 
cabotage rights in ASAs. Malaysia's main carriers for domestic air passenger transport services, 
                                               
162 CAPA online information. Viewed at: http://centreforaviation.com/profiles/countries/malaysia . 
163 MITI (2013). 
164 ADBI online information, "ASEAN Open Skies and the Implications for Airport Development Strategy 
in Malaysia". Viewed at: http://www.adbi.org/working-
paper/2008/11/04/2736.asean.open.skies.airport.development.strategy.malaysia/open.skies.in.asean/ . 
165 PM Department (2010); and the 2014 Budget Speech  introducing the Su pply Bill (2014), 
"Strengthening economic resilience, accelerating tran sformation and fulfilling promises", 25 October 2013. 
Viewed at: http://www.fmm.org.my/upload/speech.pdf .  WT/TPR/S/292 • Malaysia 
 
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  Malaysia Airlines (MAS), a government-linked company, and AirAsia, a private company, are 
accounted for 30.2% and 53.7% of total domestic air traffic volume in 2012 (Table 4.11).  
Table 4.11 Domestic market sh are of Malaysian carriers (passenger transport), 2010-12 
(%) 
 2010 2011 2012 
Malaysia Airlines (MAS) 34.1 29.0 30.2 
AirAsia 50.2 50.8 53.7 
Firefly 5.4 10.1 6.1 
Berjaya Air 0.2 0.2 0.2 
Maswings 9.2 9.3 9.1 
Other airlines 0.8 0.6 0.6 
Source: Information provided by the Malaysian authorities.  
4.109.  MAS and Air Asia also provide 25.8%  and 26.1% of international aviation services in 
Malaysia; the rest is provided by 58 foreign airlines. The Government is the majority shareholder 
of MAS (69.8%), while foreign investors hold 3.53%.166 According to authorities, the Government 
does not provide any privileges to MAS, such as subsidies, government guarantees, exclusive route access, a ground handling monopoly or captive markets. 
4.110.  Market access in the air transport services sector is governed by Malaysia's bilateral air 
services arrangements and regional arrangements within the context of ASEAN. As at October 2013, Malaysia had 99  bilateral air services arrangemen ts (ASAs) in force (including 
13 arrangements applied on a provisional basis). Of these, 5 have entered into force since 
January 2010, with Azerbaijan, Ecuador, Ethiopia, Tunisia, and Turkmenistan. 
4.111.  During the review period, ASEAN members agreed to gradually open up their aviation 
markets for unlimited air passenger services to all cities with international airports within the 
region (Table 4.12). These agreements are seen as a significant step towards open skies among 
ASEAN members in line with the region's objective of an ASEAN Economic Community by 2015. In November 2010, ASEAN members concluded the ASEAN-China Air Transport Agreement, which 
entered into force in August 2011. ASEAN is currently negotiating an ASA with the Republic 
of Korea. 
Table 4.12 ASEAN ASAs, 2013 
Agreement Entry into force 
for Malaysia Description 
ASEAN Multilateral 
Agreement on Air Services (MAAS) 15.12.2009 Designation of carriers based on either substantial 
ownership and effective control (SOEC) or principal place of business and effective control (PPOBEC) is subject to acceptance by ASEAN members. Multiple designation 
applies. Covers unlimited capacities and exercise of 3
rd, 
4th, and 5th freedom traffic rights for air passenger 
services among ASEAN capital cities. 
ASEAN Multilateral 
Agreement on the 
Full Liberalization 
of Passenger Air 
Services 
(MAFLPAS) 24.05.2011 
 Builds on the MAAS to allow designated carriers of ASEAN 
members to provide air passenger services from 
international airports in one territory to cities with 
international airports in another territory within the 
ASEAN region, with full 3rd, 4th and 5th freedom traffic 
rights. 
ASEAN Multilateral 
Agreement on the 
Full Liberalization of Air Freight 
Services (MAFLAS) 15.12.2009 Similar to the MAAS and MAFLPAS except that the 
MAFLAFS cover the 3
rd, 4th and 5th freedom traffic rights 
for air freight services among ASEAN cities with international airports. 
                                               
166 Khaznah Nasional Bhd. (a GLC) holds 69.37% of MAS' shares and 0.51% are held by other 
Government agencies and institutions (information current as at August 2013). WT/TPR/S/292 • Malaysia 
 
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  Agreement Entry into force 
for Malaysia Description 
ASEAN-China Air 
Transport 
Agreement 
(AC-ATA) 09.08.2011 Allows designated carriers of ASEAN members to provide 
air services from any city with an international airport in 
its territory to any city with an international airport in the 
territory of China and vice versa with 3rd and 4th freedom 
traffic rights. Discussions are on-going to expand the 
agreement to include 5th freedom traffic rights. 
Source: WTO document WT/TPR/S/267/Rev.1, 18 October 2012. 
4.7.4.4   Sales, reservation, market ing, repair, and maintenance services 
4.112.  There are no restrictions on the sale or  marketing of air transport services and use of 
computer reservation systems in the aviation industry.167 
4.113.  Aircraft repair and maintenance services are provided by authorized MRO companies 
(maintenance, repair, and overhaul). The auth orities confirmed that there are no equity 
restrictions in place on establishment of foreign MRO companies in Malaysia, and various foreign-owned companies are present in the Malaysian market.  Domestically licensed airlines are 
not required to undertake repair and maintenance within Malaysia. 
4.7.5  Maritime Transport 4.7.5.1  Legal and institutional framework 
4.114.  There have been no changes to the institutions responsible for maritime transport in 
Malaysia since 2010. The Ministry of Transport has overall responsibility for the sector, and its 
Marine Division is in charge of policy formulation. The MOT's Marine Department is charged with 
issues relating to maritime safety.
168 There have been no changes to maritime-related legislation 
over the review period (Table A4.2). However, it was noted in the Prime Minister's 2014 Budget Speech that regulations and laws would be reviewed as part of a broader effort to develop a more efficient logistics sector. At the same time the Prime Minister announced the allocation of 
RM 3 billion in soft loans to be provided under a Maritime Development Fund, which will be 
managed through the Bank Pembangunan Malaysia  (a DFI (see above)). The Fund will provide 
financing to support the development of the shippi ng industry, shipyard construction, oil and gas, 
and maritime-related support activities.
169  
4.7.5.2  Shipping  4.115.  Malaysia has two main commercial ship registries: Malaysian Ship Registry and the 
Malaysian International Ship Registry. 
4.116.  For vessels to be registered under the Malaysian Ship Registry the owner must be a 
Malaysian citizen or corporation; a majority shareholding (51%) must be held by Malaysians; the vessel owner must be incorporated in and have an office in Malaysia; and the ship manager must 
be a Malaysian citizen or corporation.
170 As at October 2013, 5,172 ships were registered, 
representing 10.9 million gross tonnes (GT). This included 219 oil tankers (2.2 million GT); 494 general cargo vessels (575,876 GT); 16 bulk vessels (279,991 GT), and 28 container 
vessels (186,739 GT). Malaysia has one government-linked shipping company, the Malaysian 
                                               
167 WTO document WT/TPR/S/225/Rev.1, 15 February 2010. 
168 Its functions are: ensuring the safe navigation of  merchant vessels; provid ing services to merchant 
vessels (such as ship inspection, certification, registration, and licensing); providing services to ships navigating in Malaysian waters and ports; and supe rvising the examinations of seafarers. For more 
information, see Marine Department  online information. Viewed at: http://www.marine.gov.my . 
169 The 2014 Budget Speech  introducing the Supply Bill (2014), "Strengthening economic resilience, 
accelerating transformation and fulfilling promises", 25 October 2013. Viewed at: http://www.fmm.org.my/upload/speech.pdf .  
170 These requirements are set out in the Merchant Shipping Ordinance 1952 and the Merchant Shipping 
Amendment Act 1997. Additionally the company must have paid-up capital of 10% of the value of the ship, or 
RM 1 million, whichever is higher, and tankers or bulk ships must be less than 15 years old, and other ships less than 20 years old. WT/TPR/S/292 • Malaysia 
 
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  International Shipping Corporation (MISC), regist ered under the Malaysian Ship Registry. MISC 
transports dry and liquid bulk171; it accounts for 10% of Malaysia's total seaborne trade. Various 
tax exemptions apply: the income of a shipping company which is derived from the operation of sea-going ships registered under the Malaysian Sh ip Registry is 100% exempt from income tax; 
employees working on board Malaysian ships are exempt from paying personal income tax; and 
income received by non-residents from the rental of ISO containers to Malaysian shipping companies is also income tax exempt.
172  
4.117.  The Malaysian International Ship Registry (MISR) is for ships owned by foreign citizens. 
The registry entered into operation in 2006 and is located in the offshore jurisdiction of Labuan.173 
Ship owners must be companies incorporated in Malaysia (100% foreign ownership is permitted) and must have appointed a Malaysian ship manager.
174 Ships must be under a certain age 
(15 years for tankers and bulk carriers and 20 years for all other ships) and have a minimum 
weight of 1,600 GT. In October 2013, 22 vessels were this registry, representing 138,178 GT. There have been no notable increases or decreases in registrations since 2010. MISR-registered 
vessels may undertake domestic trade. Information was not available on fiscal and non-fiscal 
benefits available to ships registered under the MISR.  
4.118.  Malaysia's cabotage policy is delineated in the Merchant Shipping Ordinance (1952), Part 
IIB. Foreign vessels are only allowed to participate in domestic shipping under an exemption 
mechanism when it is proved that there is no Malaysian vessel available or suitable to perform the job. The Malaysia Shipowners' Association has been appointed to confirm the availability of Malaysian vessels before the MOT issues the licence. The transhipment of containers by foreign 
vessels has been permitted on certain routes (a) between Penang and Port Klang; (b) Port Klang 
and Port of Pasir Gudang; (c) Port of Klang and Port of Tanjung Pelepas to Port of Sepangar, Port of Bintulu and Port of Kuching; (d) Port Klang and Tanjung Pelepas Port; and (e) Port of Penang 
and Tanjung Pelepas Port .  
4.119.  International maritime transport is open to competition: traders are free to choose 
domestic or internationally registered shipping lines. There is no requirement for government 
cargos to be shipped on Malaysian vessels. Info rmation was not available on the volume and value 
of Malaysia's exports transported by ship.  
4.7.5.3  Ports 4.120.  All of Malaysia's main commercial terminals are owned and regulated by federal/state 
statutory corporations. Port operations have been extensively contracted out to the private sector, 
with the exception of Sarawak's three ports (whi ch are owned and operated by state statutory 
corporations) (Table A4.4). There have been no new concession agreements for the operation of 
Malaysia's ports granted since 2010. Maximum foreign ownership in port operators is 49%. 
4.121.  Since 2011, the Government has allowed private companies to own and develop terminals 
for specialized cargo, such as oil and gas. Approval is required from the respective state 
government to lease the land and from th e federal government for project approval. 
4.122.  Port Klang is Malaysia's main port and is situated close to the capital, Kuala Lumpur. 
Tanjung Pelepas Port is the second biggest port an d is located at the intersection of the east-west 
international trade lines, close to Singapore. 
4.123.  Malaysia has become one of the world's major shipping hubs; container port throughput 
in 2012 was 20.8 million TEUs, putting Malaysia in a similar league to the United Arab Emirates (16.8 million TEUs in 2011); the Republic of Korea (20.8 million TEUs); and Hong Kong, China 
(24.4 million TEUs).
175 This is largely due to the rapid development of Malaysia's Tanjung Pelepas 
                                               
171 According to UNCTAD, MISC is no longer is involved in container transportation (UNCTAD online 
information. Viewed at: http://unctad.org/en/pages/Publica tionWebflyer.aspx?publicationid=380 ). 
172 ISO containers are standard-sized containe rs used for intermodal freight transport. 
173 Labuan Financial Services Author ity online information. Viewed at: 
http://www.lfsa.gov.my/malaysian-international-shipping-registry-misr . 
174 The ship manager must be a Malaysian citizen resi dent in Malaysia or a company incorporated in 
Malaysia with its principal place of business there. 
175 UNCTAD (2012). WT/TPR/S/292 • Malaysia 
 
- 118 - 
 
  Port since its inauguration in 2000. It has the country's largest container terminal and mainly 
functions as a transhipment hub, hosting the operations of major global shipping companies such as Maersk and Evergreen. Work is currently under way to increase the berthing capacity of both Port Klang and the Port of Tanjung Pelepas.
176  
4.124.  Malaysia is ranked 5th out of 159 countries in UNCTAD's 2012 Liner Shipping Connectivity 
Index (up from 12th place in 2004). This UNCTAD index considers how well connected countries 
are to global shipping networks.177  
4.125.  There has been no further liberalization of maritime transport and related services since 
2009, when maritime agency services and vessel sa lvage and refloating services were opened up 
to 100% foreign equity participation (Table A4.1). The authorities confirmed that full foreign equity participation is now allowed for maritime transport-related services as listed in Table A4.4, with 
the exception of maritime cargo handling services.  
4.7.5.4  Maritime transport-related commitments made under the GATS and RTAs 4.126.  Malaysia has made maritime transport-related commitments under the GATS and most 
RTAs to which it is signatory. However, the scope and coverage of commitments varies widely 
among agreements (Table A4.5).  
4.127.  Scheduled limitations on market access through commercial presence (mode 3) generally 
specify that such services may only be provided th rough a representative offi ce, regional office or 
locally incorporated joint-venture corporation (JVC) with Malaysian individuals or Malaysian-controlled corporations. JVCs are gene rally either subject to maximum thresholds for 
foreign equity participation or minimum bumiputera  shareholding requirements. For example, with 
respect to the provision of international maritime transportation services through mode 3, 
maximum foreign equity participation in JVCs ranges from 30% to 51%, depending on the agreement.
178 For maritime agency services and vessel salvage services, several agreements 
contain a 30% bumiputera  shareholding requirement.  
4.128.  Malaysia has made "additional commitments" under its GATS and RTA schedules to make 
various port services available to international maritime transport suppliers on reasonable and 
non-discriminatory terms and conditions.179 
4.7.6  Tourism 4.129.  There have been no changes to legislation governing the tourism sector since Malaysia's 
previous Review (Table A4.2), or to its responsible institutions, which are the Ministry of Tourism 
and Culture, and Tourism Malaysia.
180  
4.130.  In 2012, Malaysia recorded 25.03 million to urist arrivals and received RM 60.6 billion in 
tourist receipts. The vast majority of tourist arrivals are from Singapore and other Asian countries 
                                               
176 The expansion of two existing berths at Port Klan g (Westport) will increase the Port's capacity from 
14.5 million TEUs to 16 million TEUs by 2014. The development of two new berths at the Port of Tanjung Pelepas will increase the port's capacity from 8 million TE Us to 10.5 million TEUs upon completion of the works 
in 2014. 
177 The index is computed based on five maritime tr ansport sector components: number of ships, their 
container-carrying capacity, maximum vessel size, number  of services, and number of companies that deploy 
container ships in a country's ports (see UNCTAD online information. Viewed at: 
http://data.worldbank.org/indicator/IS.SHP.GCNW.XQ ). 
178 The foreign equity ceiling is 30% under the GATS, ASEAN-Australia-New-Zealand RTA, 
Malaysia-Japan FTA, and Malaysia-Pakistan FTA; 40% under the ASEAN-China RTA; 49% under the ASEAN-Korea, Malaysia-New Zealand, and Malaysia-India RTAs; and 51% under the AFAS and the Malaysia-Australia FTA.  
179 These port services are: (a) pilotage; towing and tug assistance; (b) provisioning, fuelling, and 
watering; (4) garbage collection and ballast waste disposal; (c) port captains' services; (d) navigational aids; (e) shore-based operational services essential to ship operations, including communications, water, and electrical supplies; (f) emergency repair facilities; and (9) anchorag e, berth, and be rthing services. 
180 The Ministry of Tourism and Culture is the main  policy formulating and implementing agency for 
overall development of the sector. Tourism Malaysia, a statutory body under the Ministry of Tourism and Culture, is responsible for promoting tourism and making Malaysia an outstanding tourism destination. WT/TPR/S/292 • Malaysia 
 
- 119 - 
 
  (Chart 4.3). The high-growth markets (over the period 2011-12) have been Bangladesh, China, 
Iraq, Japan, Kazakhstan, Laos, Nepal, Philippines, the Kingdom of Saudi Arabia, and Viet Nam. 
Chart 4.3 Tourist arrivals, 2012 
Thailand
5.1%Singapore
52.0%
Indonesia
9.5%Brunei Darussalam  5.0%Philippines  2.0%China  6.2%India  2.8%United Kingdom  1.6%Australia  2.0%Other
11.9%
Japan  1.9%
 
Source: Data provided by Tourism Malaysia.  
4.131.  Tourism is one of the selected areas for promotion under the 10th Malaysia Plan (10MP) 
(2011-15) (see section 2), as it is a major generator of employment and source of foreign 
exchange. In this regard, five concrete initiatives have been identified: development of affordable luxury; family fun; events, entertainment, sp a, and sports; business tourism; and nature 
adventure. By 2011, Malaysia had already reached the 10MP's targets to increase employment in 
the sector to 2 million jobs, as well as to be within the world's top 10 countries in terms of global tourism receipts. Promotion and marketing efforts are being focused on attracting high-spending 
tourists, especially from the Russian Federation, India, China, and the Middle East. 
4.132.  Notable new policy developments over the review period have been increased efforts by 
the Government to promote medical tourism through institutional strengthening and tax breaks; the introduction of new tax incentives for new four  and five star hotels, as well as measures to 
encourage cruise shipping, through the removal of cabotage restrictions on foreign cruise ships.
181 
As announced in the 2014 Budget Speech, RM 2 billion will be provided to a Special Tourism Infrastructure Fund. The fund will provide soft lo ans to finance the cost of building infrastructure 
such as hotels, resorts, and theme parks, as well as for the purchase and replacement of 
equipment related to the tourism sector. This fund will be managed by Bank Pembangunan 
Malaysia (a DFI) with loan interest rates ranging from 4-6%, with the Government providing a 2% 
subsidy. 
4.133.  There has been no further autonomous liberalization of the tourism services since 2009, 
when full foreign equity participation in certain large-scale or high-end tourism services was allowed, as well as in travel agencies and tour op erators' services for inbound travel (Table A4.2). 
No foreign investment is permitted in travel agencies for outbound travel or for hotel and 
restaurant services for budget hotels; 49% fo reign equity is permitted for convention and 
exhibition centres with a seating capacity below 5,000; hotel and restaurant services for two and 
three star hotels; food serving services (for se rvices in budget, two and three star hotels); and 
beverage serving services for consumption on the premises (for services in budget, two and three 
star hotels). Malaysia has been making increased efforts to promote medical tourism. Its objective 
is to develop a niche market of quality but cost -effective medical care. In 2009, the Ministry of 
Health established the Malaysia Healthcare Travel Council (MHTC) to promote the Malaysian healthcare industry globally; to work with public and private sector players so that medical tourists 
may have a seamless experience; and to develop programmes and strategies for medical tourism 
in Malaysia, together with other stakeholders. It also acts as a one-stop-centre for matters relating 
                                               
181 In March 2012, non-Malaysian ships were exempted from the provisions of subsection 65KA(1) of the 
Merchant Shipping Ordinance 1952 in respect of cruise se rvices from any port or place in Malaysia to another 
port or place in Malaysia (MOT online information. Viewed at: www.mot.gov.my/en/Sector al/Pages/Maritime.aspx ). WT/TPR/S/292 • Malaysia 
 
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  to healthcare travel.182 Medical providers in Malaysia wishing to become members of the MHTC 
must be evaluated by a selection committee to ensu re the quality of service. As at October 2013, 
there were 72 members of the MHTC. Other measur es to support the healthcare travel industry 
have included: (a) income tax exemptions for the construction/renovation of private hospitals as 
well as on the value of increased exports of heal thcare services (see Table 4.13); (b) the lifting of 
foreign equity limits in private hospitals, medical specialist clinics and dental specialist clinics in 2012 (Table A4.2); and (c) measures to facilitate the employment of foreign medical professionals 
and dentists and to encourage Malaysian medical specialists to return to Malaysia.
183 Efforts to 
promote medical tourism seem to have borne fruit, as the number of tourist arrivals for the primary purpose of seeking health treatm ent nearly doubled between 2010 and 2011.
184  
4.134.  Information was not available on GLCs involv ed in the tourism sector. A wide variety of tax 
exemptions are available for various tourism-related activities (Table 4.13). The authorities 
indicated that revenue forgone figures are not published.  
Table 4.13 Fiscal incentives for hotels and tourism projects, 2013 
Scheme Eligibility Incentives offered 
Pioneer Status Comp anies undertaking 
new investments in 
1-5 star hotels Five-year partial exemption from income tax 
payments. Requirement to pay tax on only 30% of 
statutory income, commencing from day of 
production. Possibility to carry forward unabsorbed capital allowances and accumulated losses 
Investment Tax 
Allowance (ITA) Companies undertaking 
new investments in 1-
5 star hotels Alternative to Pioneer Status. Allowance of 60% on 
the qualifying capital expenditure incurred within 
five years from date of expenditure. Companies may 
offset this allowance against 70% of statutory 
income in the first year of assessment. Carry 
forward of unutilized allowances 
Enhanced incentives for undertaking new 
investment in hotel 
and tourism projects Companies undertaking 
new investments in 4 & 5 star hotels in Sabah 
and Sarawak (applications 
up to 12/2013 only) Pioneer Status with inco me tax exemption of 100% 
for 5 years. Possibility to carry forward unabsorbed 
capital allowances and accumulated losses; or 
ITA of 100% on qualifying capital expenditure 
incurred within 5 years. The allowance can be offset against 100% of statutory income in year. Carry forward of unutilized allowances 
Incentives for 
reinvestments in 
hotels and tourism 
projects Companies that reinvest in 
expanding/ modernizing 1-
5 star hotels  Pioneer Status with income tax exemption of 70% 
for 5-years. Possibility to carry forward unabsorbed 
capital allowances and accumulated losses; or  
ITA of 60% on qualifying capital expenditure 
incurred within 5-years. The allowance can be offset 
against 70% of statutory income each year. Carry 
forward of unutilized allowances 
Incentive for 
healthcare travel Investment in construction 
of new private hospitals or expansion/ renovation of existing ones. Hospitals must be MOH-licensed and MHTC-registered 
(applications up to 
12/2014 only) ITA of 100% on qualifying capital expenditure within 
5 years. The allowance can be offset against 100% of statutory income each year. Carry forward of unutilized allowances  
Healthcare travel: 
double deduction 
for accreditation 
expenses Private hospitals incurring 
expenses in obtaining 
domestic/ international 
accreditation Double deduction on expenses incurred in obtaining 
domestic or internationally recognized accreditation. 
The accreditation body must be MOF-approved 
                                               
182 The MHTC reports to an advisory committee chaired by both the Minister of Health and the Minister 
in the Prime Minister's Department which heads the Economic Planning Unit. The advisory committee comprises representatives from the public and private sectors involved in health care travel (for more 
information, see Malaysia Healthcare Travel Council. Viewed at: http://www.mhtc.org.my ).  
183 All foreign medical specialists must  first be registered with the rele vant medical regulatory authorities 
such as the Malaysian Medical Council and the National Specialist Registry (NSR) before they can apply for 
appointment to practice in Malaysian healthcare facilities. 
184 Malaysia received 392,956 medical tourists in 2010 and 583,296 in 2011, representing an increase of 
48%. WT/TPR/S/292 • Malaysia 
 
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  Scheme Eligibility Incentives offered 
Incentives for the 
luxury yacht industry Companies constructing 
luxury yachts  
 
Companies carrying out repair and maintenance services for luxury yachts in Langkawi  
Companies providing 
luxury yacht charter services Pioneer status with income tax exemption of 70% 
for  5 years. Unabsorbed capital allowances and accumulated losses may be carried forward 
 
Income tax exemption of 100% for 5 years     
Income tax exemption of 100% for 5 years 
Double deduction 
on overseas 
promotion and 
trade fairs Hotels and tour operators  Double deduction on qualif ying expenditure incurred 
for various promotional activities overseas and for 
participation in approved international trade fairs in 
Malaysia 
Tax exemption for 
tour operators Tour operators licenced by 
Ministry of Tourism and Culture Tour operators who bring in at least 750 foreign 
tourists in groups in a year are exempt from income tax related to the income derived from operating such tours Tour operators organizing domestic tour packages 
within Malaysia involving the participation of least 
1,500 local tourists per year are exempt from income tax related to the income derived from operating such tours  
Tax exemption for 
organizing/ 
promoting 
international 
conferences and 
trade exhibitions Companies promoting/ 
organizing international 
conferences in Malaysia Tax exemption on income earned from bringing at 
least 500 foreign participants into the country 
(applies to local companies promoting conferences 
only). Tax exemption for income earned from 
organizing approved international trade exhibitions, 
whereby the organizers bring in at least 500 foreign 
visitors per year (applies to both local and foreign 
companies) 
Deduction on cultural performances Companies promoting and 
managing musical/cultural groups and sponsoring approved cultural performances Single deduction for expenditure. Ceiling for 
deductions for local perfor mances is RM 500,000 per 
year. Ceiling for deductions for foreign performances is RM 200,000 per year 
Incentive for car 
rental operators Car rental operators and 
tour operators Car rental operators may re ceive a full excise duty 
exemption on purchase of national cars. Tour 
operators are eligible for a 50% excise duty 
exemption on locally assembled four-wheel-drive 
vehicles 
Tax exemptions on 
the value of 
increased exports Healthcare services offered 
to foreign clientsa Tax exemption of 100% on the value of increased exports subject to 70% of the income for each year 
of assessment 
a Foreign clients are defined as: (a) a non-Malaysia n citizen that participates in the "Malaysia My 
Second Home" programme and his/her dependants; (b) a non-Malaysian citizen holding a Malaysian 
student pass and his/her dependents; (c) a non-Ma laysian citizen holding a Malaysian work permit 
and his/her dependents; or (d) a Malaysian citize n who is non-resident and his/her dependents. 
Source: MIDA online information. Viewed at: http://www.mida.gov.my/env3 /index.php?page=tourism-
industry . 
4.7.7  Professional services 
4.7.7.1  Accounting (including audit) and taxation services 
4.135.  Over the review period, there have b een no changes to legislation governing the 
accountancy sector (Accountants Act, 1967), or to the governing regulatory body (the Malaysian 
Institute of Accountants (MIA)).185 All firms must be established either as sole proprietorships or 
partnerships. Foreign practitioners are permitted to establish an accounting entity in Malaysia with 
                                               
185 The Accountants Act, 1967. Viewed at: http://www.mia.org.my/handbook/act/ .  WT/TPR/S/292 • Malaysia 
 
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  100% foreign ownership. All accountants, auditors, and tax agents must be registered with the 
MIA before they apply for a licence from the Ministry of Finance. To be eligible for registration, applicants must be citizens or permanent residents. Qualification and work experience requirements apply equally to domestic and foreign accountants, auditors, and tax agents, and are 
set out in Part IV of the Accountants Act. 
4.7.7.2  Legal services 4.136.  The Legal Profession (Amendment) Act 2012, was gazetted in September 2012, but has 
yet to enter into operation, pending the finali zation of the Legal Profession (Licensing of 
International Partnerships and Qualified Foreign Law Firms and Registration of Foreign Lawyers) Rules 2013 and the Guidance Note for Applicants, which are being formulated by the Attorney 
General's Chambers and the Bar Council. Under previous legislation, there was a 100% Malaysian 
equity ownership requirement for law firms. Additionally, foreign legal service suppliers were not 
allowed to practice in Malaysia, except in the Federal Territory of Labuan (and only with respect to advisory and consulting services relating to ho me-country laws, international law, and offshore 
corporation laws of Malaysia). The 2012 Act allows for the establishment of international 
partnerships; qualified foreign law firms as well as the employment of foreign lawyers by Malaysian law firms. Applications for licences to undertake these activities are made to the Bar 
Council, which will seek a recommendation of a newly established Selection Committee. The Bar 
Council has the discretion to accept or refuse applications as it sees fit. Licences granted may be subject to conditions (which may be modified after the licence is granted) and will set out the permitted areas of practice. A foreign law firm may not be part of more than one international 
partnership in Malaysia at any one time, and the permissible equity and voting rights of the foreign 
law firm in the international partnership are to be determined by the Selection Committee.  
4.7.7.3  Architectural services 
4.137.  Architectural services will be autonomously liberalized once the Architects Act 1967 has 
been amended. With the amendments, 100% ownershi p of architectural firms will be permitted. As 
at October 2013 there was no concrete timeframe for the enactment of new legislation. Under the 
1967 Act, architectural consultancy practices may take the form of sole proprietorships or 
partnerships. Foreigners may hold a maximum of 30% foreign equity in such a practice. To be 
registered as professional architects, individuals must be citizens or permanent residents of Malaysia, have obtained the required qualifications and practical experience, and be a member of 
the Malaysian Institute of Architects.
186 It is foreseen that the amended act will relax citizenship 
and residency requirements for architects. Foreign architects (who are not citizens or permanent residents of Malaysia) may only be registered as temporary architects when they are a consultant 
to a project either wholly owned by a foreign government, or implemented under a bilateral 
arrangement. With respect to cross-border supply of architectural services, foreign architectural firms may enter into joint ventures with local firms on specific projects, with the approval of the 
Board of Architects, which is responsible for the enforcement of the 1967 Act.  
4.7.7.4  Engineering services 4.138.  Engineering services will be autonomously liberalized once the the Registration of 
Engineers Act, 1967 has been amended. With th e amendments, foreign practitioners will be 
allowed 100% ownership of engineering consultancy practices (the current foreign ownership 
threshold is 30%). As at October 2013, there was no concrete timeframe for the enactment of new legislation. To apply for registration as a Profe ssional Engineer a graduate engineer must be a 
Malaysian citizen or permanent resident, have three years of experience and passed the 
Professional Assessment Examination. Foreign engineers may have their qualifications recognized in Malaysia via the Washington Accord.
187 It is foreseen that residency and citizenship 
requirements for registered professional engin eers will be relaxed with amendments to the 
1967 Act. The governing regulatory body for th e subsector is the Board of Engineers.  
                                               
186 According to the authorities, foreign trained arch itects who graduate from programmes that are not 
in the Malaysian Institute of Architects' list of recogn ized architecture programmes may apply for an exemption 
from certain examination requirements.  
187 For more information on the Washington Accord, see http://www.washingtonaccord.org .  WT/TPR/S/292 • Malaysia 
 
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  4.7.7.5  Quantity surveying services 
4.139.  Quantity surveying services will be autono mously liberalized once the the Registration of 
Quantity Surveyor's Act, 1967 has been amended.  With the amendments, foreign practitioners will 
be allowed 100% ownership of engineering consultancy practices (the current foreign ownership 
threshold is 30%). As at October 2013, there was no concrete timeframe for the enactment of new 
legislation. Under the Quantity Surveyors Act (1967), firms must be established as a corporation, sole proprietorship or partnership. The Act specif ies that quantity surveyors must be registered 
with the Board of Quantity Surveyors Malaysia, and have successfully graduated from an 
accredited course, passed a test of professional competence, and undertaken the necessary work experience. Only Malaysian citizens may be registered with the Board, although it is envisaged that with the new act this citizenship clause will be removed. Currently, foreign quantity surveyors 
may apply to the Board for temporary registration. WT/TPR/S/292 • Malaysia 
 
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http://www.pmo.gov.my/dokumen attached/RMK/RMK10_Eds.pdf . WT/TPR/S/292 • Malaysia 
 
- 128 - 
 
  PM Department/Economic Planning Unit (2012), The Malaysian Economy in Figures 2012 . Viewed 
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- 129 - 
 
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  WT/TPR/S/292 • Malaysia  
 
- 130 - 5  APPENDIX TABLES 
Table A2. 1 WTO notifications, 1 January 2010 to 31 October 2013 
Agreement Requirement/content Periodicity WTO document and date (latest document if recurrent) 
Agreement on Agriculture 
Articles 10 & 18.2 Tables ES:1 and ES:2 - Export 
subsidies Annual G/AG/N/MYS/29, 28 March 2012 
G/AG/N/MYA/26, 16 March 2010 
Articles 5.7 and 18.2 Table MA.5 – Special safeguard Annual G/AG/N/MYS/28, 27 March 2012 
G/AG/N/MYA/27, 16 March 2010 
Agreement on Implementation of Article VI of the GATT 1994 (Anti-dumping) 
Article 16.4 Semi-annual reports of anti-
dumping actions (taken within the 
preceding six months) Semi-annual G/ADP/N/244/MY S, 24 September 2013 
G/ADP/N/237/MYS, 21 January 2013 
G/ADP/N/230/MYS, 26 September 2012 
G/ADP/N/223/MYS, 14 March 2012 G/ADP/N/216/MYS, 23 September 2011 
G/ADP/N/209/MYS, 18 April 2011 
G/ADP/N/202/MYS, 8 September 2010 G/ADP/N/195/MYS, 15 February 2010 
General Agreement on Tariffs and Trade 1994 
Enabling clause - GSP Notification of regional trade 
agreement Ad hoc WT/COMTD/N/37, 12 September 2011 
WT/COMTD/N/35, 23 August 2010 
Agreement Implementation of Article XXI V:7(a) of the GATT 1994 (Free-trade areas)  
Article XXIV of the 
GATT 1994  Customs unions and free-trade 
areas Ad hoc WT/REG340/N/1, 13 May 2013 
WT/REG330/N/1, 13 February 2013 WT/REG287/N/1, 8 July 2010 
WT/REG284/N/1, 9 April 2010 
Understanding on the Interpretation of Ar ticle XVII of the GATT 1994 (State trading) 
Article XVII:4(a) State-trading activities Annual G/STR/N/11/MYS; G/STR/N/12/MYS; 
G/STR/N/13/MYS; G/STR/N/14/MYS, 2 September 2013 
G/STR/N/2/MYS; G/STR/N/3/MYS; G/STR/N/4/MYS; 
G/STR/N/5/MYS; G/STR/N/6/MYS; G/STR/N/7/MYS; G/STR/N/8/MYS; G/STR/N/9/MYS; 
G/STR/N/10/MYS, 7 July 2010 
General Agreement on Trade in Services 
Article V:7(a) Free-trade agreements 
 Ad hoc S/C/N/695, 13 May 2013 
S/C/N/599, 12 September 2011 
S/C/N/559, 8 July 2010 S/C/N/545, 9 April 2010  
  WT/TPR/S/292 • Malaysia  
 
- 131 - Agreement Requirement/content Periodicity WTO document and date (latest document if recurrent) 
Agreement on Import Licensing Procedures 
Article 1.4(a) and/or 
8.2(b)  Laws and regulations Once, then changes G/LIC/N/1/MYS/2, 11 April 2013 
G/LIC/N/1/MYS/1, 7 September 2011 
Articles 5.1, 5.2, 5.3 Notification of an automatic import 
licensing programme  Ad hoc G/LIC/N/2/MYS/5, 3 July 2012 
G/LIC/N/2/MYS/4, 19 April 2010 
Article 7.3 Replies to questionnaire on import 
licensing procedures Annual G/LIC/N/3/MYS/7, 10 October 2011 
G/LIC/N/3/MYS/6,28 April 2011 
G/LIC/N/3/MYS/5, 26 January 2010 
Agreement on Rules of Origin 
Annex II Preferential rules of origin Ad hoc G/RO/N/91, 9 April 2013 
Agreement on Safeguards  
Article 12.1(a)  Initiation of investigations Ad hoc G/SG/N/6/MYS/1, 9 May 2011 
Decision of the 
Committee on 
Safeguards  Termination Ad hoc G/SG/N/9/MYS/1, 7 September 2011 
Agreement on the Application of Sa nitary and Phytosanitary Measures  
Article 7 and Annex B Laws, regulations and emergency 
measures Ad hoc G/SPS/N/MYS/26, 7 January 2011 
G/SPS/N/MYS/25, 13 August 2010 
G/SPS/N/MYS/20, 6 July 2009 
Agreement on Subsidies and Countervailing Measures  
Article 25.1 Article XVI:1 of the GATT 1994 and 
Article 25 of the SCM Agreement Full notification every three 
years; annual updating G/SCM/N/259/Add.1, 18 October 2013 
G/SCM/N/220/MYS, 14 October 2011 
Agreement on Technical Barriers to Trade  
Articles 2.9, 2.10, 5.6, 
and 5.7 Proposed and adopted technical 
regulations Ad hoc 2013: G/TBT/N/MYS/33-36 
2012: G/TBT/N/MYS/28-32 
G/TBT/N/MYS/27/Rev.1, 2 May 2012 
2011: G/TBT/N/MYS/18-27 
2010: G/TBT/N/MYS/15/Rev.1, 19 October 2010 
G/TBT/N/MYS/17, 20 August 2010 
Agreement on Trade-Related Aspects of Intellectual Property Rights  
Article 63.2 Laws and regulations  Once, then changes IP/N/1/MYS/D/2, 6 August 2013 
IP/N/1/MYS/D/3, 6 August 2013 
IP/N/1/MYS/G/3, 6 August 2013 
IP/N/1/MYS/2, 2 August 2013 
Article 69 Contact points Once, then changes IP/N/3/MYS/1, 1 August 2013 
Source: WTO Secretariat. 
  
  WT/TPR/S/292 • Malaysia  
 
- 132 - Table A3. 1 Malaysia's tariff summary, 2009 and 2013 
  2009 2013 
Number 
of lines Average 
(%) Range 
(%) Duty free 
(%) Number 
of lines Average 
(%) Range 
(%) Duty free 
(%) 
Total 10,389 7.4 0-90 60. 3 9,417 5.6 0-90 64.6 
HS 01-24 1,307 2.7 0-90 72.2 1,526 2.5 0-90 74.6 
HS 25-97 9,082 8.0 0-60 58.6 7,891 6.2 0-60 62.6 
By WTO category         
WTO agricultural products 1,192 2.8 0-90 70.9 1,255 2.9 0-90 70.9 
Animals and products thereof 142 3.1 0-50 88.0 176 2.5 0-50 89.8 
Dairy products 46 3.7 0-50 84.8 38 4.5 0-50 81.6 
Fruit, vegetables, and plants 345 2.1 0-90 73.6 346 2.0 0-90 73.1 
Coffee and tea 29 6.2 0-15 41.4 29 6.2 0-15 41.4 
Cereals and preparations 144 6.2 0-50 59.0 161 6.3 0-50 60.9 
Oils seeds, fats, oil, and their products 201 2.1 0-20 64.2 213 2.2 0-20 63.4 
Sugars and confectionary 31 1.6 0-15 87.1 22 2.3 0-15 81.8 
Beverages, spirits, and tobacco 102 3.7 0-20 35.3 110 3.7 0-20 34.5 
Cotton 5 0.0 0 100.0 5 0.0 0 100.0 
Other agricultural products, n.e.s. 148 0.9 0-25 58.9 155 0.8 0-25 91.6 
WTO non-agricultural products  9,197 7.9 0-60 58.8 8,162 6.0 0-60 63.6 
Fish and fishery products 192 1.6 0-20 80.7 349 1.0 0-20 88.5 
Minerals and metals 1,463 15.4 0-60 39.0 1,235 8.7 0-60 44.0 
Chemicals and photographic supplies 1,341 4.8 0-50 70.5 1,261 4.4 0-50 73.0 
Wood, pulp, paper, and furniture 2,380 2.5 0-40 86.1 1,824 2.7 0-40 84.6 
Textiles 894 11.4 0-30 21.7 810 8.9 0-30 30.9 
Clothing 236 15.4 0-20 19.9 248 0.2 0-20 98.8 
Leather, rubber, footwear, and travel goods 391 13.0 0-40 40.7 319 11.4 0-40 48.6 
Non-electric machinery 770 5.8 0-35 67.0 709 5.0 0-35 69.4 
Electric machinery 429 6.1 0-30 63.9 380 6.2 0-30 62.6 
Transport equipment 451 18.1 0-50 23.3 410 17.6 0-50 22.9 
Non-agricultural products, n.e.s. 619 5.8 0-50 60.7 584 5.7 0-50 63.2 
Petroleum 30 0.5 0-5 90.0 32 0.5 0-5 90.6 
By ISIC sector         
ISIC 1 - Agriculture, hunting and fishing 1,637 0.7 0-90 94.3 1,305 1.1 0-90 92.0 
ISIC 2 - Mining 119 0.8 0-30 90.8 116 0.9 0-30 90.5 
ISIC 3 - Manufacturing 8,632 8.7 0-60 53.4 7,995 6.4 0-60 59.7 
Manufacturing excluding food processing 7,698 9.4 0-60 51.4 6,936 7.0 0-60 57.7 
ISIC 4 - Electrical energy 1 0.0 0 100.0 1 0.0 0 100.0 
By stage of processing         
First stage of processing 2,041 1.1 0-90 92.8 1,695 1.3 0-90 91.5  
  WT/TPR/S/292 • Malaysia  
 
- 133 -   2009 2013 
Number 
of lines Average 
(%) Range 
(%) Duty free 
(%) Number 
of lines Average 
(%) Range 
(%) Duty free 
(%) 
Semi-processed products 3,445 8.7 0-50 57.2 3,118 5.6 0-50 60.9 
Fully processed products 4,903 9.7 0-60 49.0 4,604 7.2 0-60 57.1 
By HS section         
01 Live animals and products 325 2.8 0-50 85.8 478 2.2 0-50 88.9 
02 Vegetable products 354 2.7 0-90 73.4 399 2.5 0-90 75.0 
03 Fats and oils 166 2.5 0-20 59.0 171 2.6 0-20 58.5 
04 Prepared food, beverages and tobacco 462 2.6 0-20 66.5 478 2.6 0-20 65.9 
05 Mineral products 203 1.4 0-50 87.7 202 1.4 0-50 87.6 
06 Chemicals and products thereof 1,083 2.2 0-50 84.9 1,025 2.0 0-50 86.6 
07 Plastics, rubber, and articles thereof 655 13.5 0-40 29.0 563 13.4 0-40 28.6 
08 Raw hides and skins, leather, and its products 99 5.3 0-25 63.6 82 0.4 0-10 96.3 
09 Wood and articles of wood 2,024 1.4 0-40 92.9 1,511 1.4 0-40 91.9 
10 Pulp of wood, paper and paperboard 333 10.4 0-30 37.2 294 10.4 0-25 38.8 
11 Textiles and textile articles 1,075 11.9 0-30 22.4 1,025 6.4 0-30 48.5 
12 Footwear, headgear, etc. 84 14.0 0-30 31.0 71 6.3 0-30 60.6 
13 Articles of stone, plaster, cement 204 18.2 0-60 24.0 188 17.3 0-60 26.1 
14 Precious stones and metals, pearls 62 2.7 0-20 67.7 58 0.4 0-10 93.1 
15 Base metals and articles thereof 1,020 18.6 0-50 29.3 823 9.3 0-30 32.9 
16 Machinery, electrical equipment, etc. 1,257 5.4 0-35 68.3 1,140 5.0 0-35 69.3 
17 Transport equipment 463 17.8 0-50 24.0 422 17.3 0-50 23.7 
18 Precision equipment 266 0.8 0-35 91.4 244 0.8 0-35 92.2 
19 Arms and ammunition 26 14.2 0-30 7.7 22 13.6 0-30 9.1 
20 Miscellaneous manufactured articles 218 9.6 0-50 40.4 213 9.5 0-50 44.6 
21 Works of art, etc. 10 2.0 0-5 60.0 8 1.3 0-5 75.0 
Note:  Calculations exclude in-quota and specific rates and include the ad valorem  part of compound and alternate rates. The 2009 tariff is based on HS02 nomenclature; the 
2013 tariff is based on HS12. Calculations for averages are based on national tariff line level (9-digit). 
Source:  WTO Secretariat calculations, based on data provided by the Malaysian authorities. 
 
  
  WT/TPR/S/292 • Malaysia  
 
- 134 - Table A4. 1 Quota utilization for TRQ products, 2011  
HS code Description Unit In-quota 
tariff Out-of-quota 
tariff Quota 
volume Import 
volumea Import origin 
0103.91.000 Live swine, weighing less than 50 kg Unit 15 20  -  
0103.92.000 Live swine, weighing 50 kg or more Unit 15 20  -  
0105.11.900 Day-old chicks of the species gallus 
domesticus  weighing not more than 
185 g other Unit 10 20 2,674,722 3,410,122 Australia, France, Germany, 
Netherlands, United Kingdom, United States 
0105.94.190 Fowl of species gallus domesticus  
weighing not more than 2,000 g Unit 10 20 2,111,102 4,446 Netherlands 
0203.11.000 Meat of swine – carcasses and half-
carcasses, frozen Tonne 25 50 1,908 290,539 China, Viet Nam 
0203.21.000 Meat of swine – carcasses and half-
carcasses, fresh or chilled Tonne 25 50 1864 304 Germany 
0207.11.000 Of fowl of species gallus dimesticus  – 
not cut in pieces, fresh or chilled Tonne 20 40 10,252 1,753 Netherlands 
0207.12.000 Of fowl of species gallus dimesticus  – 
not cut in pieces, frozen Tonne 20 40 10,151 406164 Brazil, Thailand 
0207.13.000 Of fowl of the species gallus 
domesticus  – cuts and offal, fresh or 
chilled Tonne 20 40 10,151 55,812  Germany, Thailand 
0207.14.000  Of fowl of the species gallus 
domesticus  – cuts and offal, frozen Tonne 20 40  18,909 34,674,373  China, Denmark, Germany, 
Netherlands, United States 
0401.10.110 Milk and cream, not concentrated nor 
containing added sugar or other 
sweetening matter, of a fat content, by weight, not exceeding 1%, liquid Litre 20 50 1,728,140 421,782 Australia; Austria; France; 
Germany; Hong Kong, China; 
Ireland, Netherlands, New Zealand, United Kingdom, United States 
0401.20.110 Milk and cream, not concentrated nor 
containing added sugar or other 
sweetening matter, of a fat content, 
by weight, exceeding 1% but not 
exceeding 6%, liquid Litre 20 50 4,784,420 811,795 Australia, Indonesia, 
New Zealand, Thailand 
0401.30.110 Milk and cream, not concentrated nor 
containing added sugar or other 
sweetening matter, of a fat content, by weight, exceeding 6%, liquid Litre 20 50 2,030,100 1,372,473 Australia, Ireland, 
New Zealand, Singapore 
0407.00.111 Chicken eggs in shell for hatching Unit 10 50  -  
0407.00.112 Duck eggs in shell for hatching Unit 10 50  -   
  WT/TPR/S/292 • Malaysia  
 
- 135 - HS code Description Unit In-quota 
tariff Out-of-quota 
tariff Quota 
volume Import 
volumea Import origin 
0407.00.910 Chicken eggs in shell, preserved or 
cooked-other Unit 10 50 80,577,850 2,710 Australia, Germany, 
Netherlands 
0407.00.920 Duck eggs in shell, preserved or 
cooked-other Unit 10 50 81,077,850 240 China 
0704.90.110 Round cabbages Tonne Nil 90 47,675 43,366.73 China, Indonesia, Netherlands, 
Thailand 
a Provisional data. 
Source: Information provided by the Malaysian authorities. 
  
  WT/TPR/S/292 • Malaysia  
 
- 136 - Table A4. 2 Services liberalization, 2009-13 
Services subsector Market opening 
(date announced) New foreign ownership ceiling 
(date of implementation) Previous foreign 
ownership ceiling 
BUSINESS SERVICES    
Professional Services    
 Accounting (including audit) and taxation 2011 100%  (2012)  None  
 Legal services  2011 Foreign equity ceiling not yet 
decided (not yet implemented) Foreign ownership not 
previously allowed 
 Architectural services 2011 100%  (not yet implemented) 30%  
 Engineering services 2011 100%  (not yet implemented) 30%  
 Quantity surveying services 2011 100%  (not yet implemented) 30% 
Computer and Related Services    
 Consultancy services related to the installation  of computer hardware 2008 100% (2009) None 
 Software implementation services - systems and software consulting 
services; systems analysis services; systems design services; 
programming services and systems maintenance services 2008 100% (2009) None 
 Data processing services - input preparation services; data processing 
and tabulation services; time sharing services and other data 
processing services 2008 100% (2009) None 
 Database services 2008 100% (2009) None  
 Maintenance and repair services of computers 2008 100% (2009) None 
 Other services - data preparation services; training services; data 
recovery services; and development of creative content 2008 100% (2009) None 
Rental/Leasing Services without Operators    
 Rental/leasing services of ships that excludes cabotage and offshore 
trades 2009 100% (2009) 30% 
 Rental of cargo vessels without crew (bareboat charter) for 
international shipping 2009 100% (2009) 30% 
Other business services    
 Regional distribution centres 2009 100% (2009) None 
 International procurement centres 2009 100% (2009) None 
 Technical testing and analysis services - composition and purity 
testing and analysis services, testing and analysis services of physical properties, testing and analysis of integrated mechanical and 
electrical system and technical inspection services  2009 100% (2009) 70%  
 Management consulting services - general, financial (excluding 
business tax), marketing, human resources, production and public 
relations services  2009 100% (2009) 49%  
  WT/TPR/S/292 • Malaysia  
 
- 137 - Services subsector Market opening 
(date announced) New foreign ownership ceiling 
(date of implementation) Previous foreign 
ownership ceiling 
COMMUNICATION SERVICES    
Courier services    
 Courier services 2011 100%  (2012) n.a. 
Telecommunications services    
 Telecommunications licenses for application service providers (ASPs)  2011 100% (2012) 40% 
 Telecommunications licences for network service providers (NSPs) 
and Network Facilities providers (NFPs) 2011 70% (2012) 30% 
DISTRIBUTION SERVICES    
 Departmental and speciality stores  2011 100%  (2012) 70%  
EDUCATIONAL SERVICES    
 Technical and vocational schools 2011 100%  (2012) n.a. 
 Technical and vocational schools for students with special needs 2011 100%  (2012) n.a. 
 Skills training centres   2011 100%  (2012) .. 
 International schools 2011 100%  (2012) 20% 
 Private universities 2011 100%  (2012) 51%  
ENVIRONMENTAL SERVICES    
 Incineration services   2011 100%  (2012) .. 
HEALTH-RELATED AND SOCIAL SERVICES    
 All veterinary services 2009 100% (2009) Foreign ownership not 
previously allowed  
 Welfare services delivered through residential institutions to the aged 
and handicapped 2009 100% (2009) Foreign ownership not 
previously allowed 
 Welfare services developed through residential institutions to children 2009 100% (2009) Foreign ownership not 
previously allowed 
 Child day-care services including day-care services for the 
handicapped 2009 100% (2009) Foreign ownership not 
previously allowed 
 Vocational rehabilitation services for handicapped 2009 100% (2009) Foreign ownership not 
previously allowed 
 Private hospitals 2011 100% (2012) 30% 
 Medical specialist clinics 2011 100% (2012) Foreign ownership not 
previously allowed 
 Dental specialist clinics 2011 100% (2012) Foreign ownership not 
previously allowed 
TOURISM SERVICES    
 Theme park 2009 100% (2009) 49%  
 Convention and exhibition centre (seating capacity of above 5,000) 2009 100% (2009) 49%  
 Travel agencies and tour operators services (for inbound travel) 2009 100% (2009) 49%  
 Hotel and restaurant services (for 4 and 5 star hotels) 2009 100% (2009) 49%   
  WT/TPR/S/292 • Malaysia  
 
- 138 - Services subsector Market opening 
(date announced) New foreign ownership ceiling 
(date of implementation) Previous foreign 
ownership ceiling 
 Food serving services (for services provided in 4 and 5 star hotels) 2009 100% (2009) 49%  
 Beverage serving services for consumption on the premises (for 
services provided in 4 and 5 star hotels) 2009 100% (2009) 49%  
SPORTING AND OTHER RECREATIONAL SERVICES    
 Sporting services (sports event promotion and organization services) 2009 100% (2009) None 
TRANSPORT SERVICES    
 Class C freight transportation (Private carrier licence in order to 
transport own goods)a  2009 100% (2009) None 
Supporting and auxiliary transport services    
 Maritime agency services 2009 100% (2009) 30% 
 Vessel salvage and re-floating services 2009 100% (2009) 30% 
n.a. Not applicable. 
.. Not available.  
a. Relates to road transportation. Source: MITI online information. Viewed at: http://myservices.miti.gov.my/web/guest/autono mous;jsessionid=283CB21AA7AAC1E8A27A8C5913AAE31B ; and information 
provided by the Malaysian authorities. WT/TPR/S/292 • Malaysia 
 
- 139 - 
 
  Table A4. 3 Legislation governing services sectors, 2013 
Sector Legislation 
Banking and insurance Development Finance Institutions Act, 2002 
 Labuan Financial Services and Securities Act, 2010 
 Labuan Islamic Financial Services Act, 2010 
 Malaysia Deposit Insurance Corporation Act, 2011 
 Islamic Financial Services Act, 2013 
 Financial Services Act, 2013 
Telecommunications  Communications and Multimedia Act, 1988 
 Communications and Multimedia Commission Act, 1988 
Maritime transport Carriage of Goods by Sea Act, 1950 
 Merchant Shipping Ordinance, 1952 
 Penang Port Commission Act, 1955 
 Sarawak Port Authorities Ordinance, 1961 
 Port Authorities Act, 1963 
 Sabah Port Authority Enactment Act, 1967 
 Bintulu Port Authority Act, 1981 
 Ports (Privatisation) Act, 1990 
Air transport  Civil Aviation Act, 1969 (and Civil Aviation Regulations 1996) 
 Carriage by Air Act, 1974 
 Aviation Offenses Act, 1984 
 Airport and Aviation Services (Operating Company) Act, 1991 
 International Interest in Mobile Equipment (Aircraft) Act, 2006 
Tourism Tourism Industry Act, 1992 (latest amendment 1998)  
 Malaysia Tourism Promotion Board, 1992 
 Tourist Vehicles Licensing Act, 1999 
Source: Various government sources.  
  WT/TPR/S/292 • Malaysia  
 
- 140 - Table A4. 4 Federal and state ports: volume of traffic, ownership, and operation, 2013 
 Regulator Operator(s) Operator: foreign 
equity 
participation (%) Arrivals of ocean-going 
vessels (2012) 
Number '000 GRT 
Federally-owned ports       
Klang Port Port Klang Authority Northport (Malaysia) Berhad 
Westports Malaysia Sdn Bhd. 30% 
30% 15,279 384,436 
Tanjung Pelepas Port Johor Port Authority  Port of Tg Pelepas Sdn. Bhd. 30% 4,728 40,328 
Penang Port Penang Port Commission Penang Port Sdn Bhd 0% 3,962 66,941 
Johor Port Johor Port Authority Johor Port Bhd 
 0% 3,678 30,286 
Kuantan Port Kuantan Port Authority Kuantan Port Consortium Sdn Bhd 40% 2,059 44,469 
Kemaman Port Kemaman Port Authority Konsortium Pelabuhan Kemaman Sdn 
Bhd 0% 564 5,723 
Bintulu Port Bintulu Port Authority Bintulu Port Sdn Bdh 0% 2,806 63,987 
Port of Tanjung Bruas Malacca Port Authority Syarikat perkhidmatan Pelabuhan 
Gabungan Sdn Bhd (until 
31 October 2013) 0% 71 384 
State-owned ports      
Sabah      
Sepanggar Port; Tawau Port; Lahad 
Datu Port; Sandakan Port; Kunak Port; 
Kudat Port  Sabah Ports Authority Sabah Ports Sdn Bhd 0% 4,791 37,997 
Sarawak       
Kutching Port  Kutching Port Authority Kutching Port Authority 0% 736 10,337 
Rejang Port  Rejang Port Authority Rejang Port Authority 0% 281 3,611 
Miri Port  Miri Port Authority Miri Port Authority 0% 371 6,134 
Source: Maritime Institute of Malays ia online information. Viewed at: www.mima.gov.my/mima/web -links/malaysian-ports ; Department of Statistics (2012), Statistics Yearbook 
Malaysia  2011, September. Viewed at 
http://www.statist ics.gov.my/portal/download _Buku_Tahunan/files/BKKP/2011/ Buku_Tahunan_Perangkaan_Malaysia_2011[Laporan_Lengkap ].pdf; Ministry of 
Transport (2013), Table 3.7, Statistics Book 201 , Kuala Lumpur; and information provid ed by the Malaysian authorities. 
  
  WT/TPR/S/292 • Malaysia  
 
- 141 - Table A4. 5 Maritime transport commitments under  the GATS and FTAs: market access, modes 1-3 
 GATS AFAS ASEAN- 
Korea ASEAN- 
China ASEAN- 
Aus-NZ Mal- 
Jap Mal- 
Pak Mal- 
NZ Mal- 
India Mal- 
Aus 
■ - full commitment/no restriction; ◘ - partial commitment;  
□ - unbound/no commitment; U* - unbo und as not technically feasible 
International maritime 
transportation servicesa M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ 
Maritime agency services M1 ■ 
M2 ■ 
M3 ◘  
- M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ■ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ■ M1 ■ 
M2 ■ 
M3 ■ 
Maritime cargo handling 
services - M1 ■ 
M2 ■ 
M3 ◘ - - - - - M1 ■ 
M2 ■ 
M3 ◘ - - 
Cargo vessel rental with crew 
(international shipping) - 
 M1 ■ 
M2 ■ 
M3 ■ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ■ - M1 ■ 
M2 ■ 
M3 □ M1 ■ 
M2 ■ 
M3 ◘ - - - 
Cargo vessel rental without 
crew (international shipping) -  
- M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ■ - M1 ■ 
M2 ■ 
M3 □ - - M1 ■ 
M2 ■ 
M3 ■ - 
Maintenance and repair 
services - M1 U* 
M2 ■ 
M3 ◘ M1 U* 
M2 ■ 
M3 ◘  - - M1 U* 
M2 ■ 
M3 ◘ - M1 ■ 
M2 ■ 
M3 ◘ - 
Vessel salvage and refloating 
services M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ■ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ■ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ■ M1 ■ 
M2 ■ 
M3 ■ 
Classification societiesb  - M1 ■ 
M2 ■ 
M3 ◘ - - - - - M1 □ 
M2 ■ 
M3 ◘ - - 
Maritime freight forwarding 
services - M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ M1 ■ 
M2 ■ 
M3 ◘ - - - - M1 ■ 
M2 ■ 
M3 ◘ - 
a Commitments exclude cabotage. Under some agre ements governme nt cargos are also excluded. 
b Classification societies are entities that establish technica l standards for the construction and operation of ships and offs hore structure, and undertake survey to ensure 
compliance. 
Note: Mal-Jap (Malaysia-Japan RTA); Mal-Pak (Malaysia-Pakistan RT A); Mal-NZ (Malaysia-New Zealan d RTA); Mal-India (Malaysia-Ind ia RTA); Mal-Aus (Malaysia-Australia 
RTA). 
Source:  WTO document GATS/SC/52, 15 April 1994; and WTO RTA database. Viewed at: http://rtais.wto.org . 
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