Malaysia WT/TPR/S/156/Rev.1 
 Page 33 
 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
(1) INTRODUCTION  
1. Since its previous Review in 2001, Malaysia ha s, by and large, continued to liberalize its 
trade and trade-related policies.  Nonetheless, tr ade and trade-related policy instruments remain 
integral parts of Malaysia's br oad industrial development policy1, aimed at, inter alia,  sustainable 
economic growth, in order to atta in developed country status by 2020 and a more equitable wealth 
distribution.  Policy instruments to achieve these  and other objectives are applied both at the border 
and internally. 
2. The tariff continues to be the main border measure affecting imports.  In terms of tariff 
bindings, there seems to have been little change since 2001.  Over one third of tariff lines remain 
unbound and the considerable gap between bound  and applied tariffs creates a degree of 
unpredictability for traders as there is significant sc ope for the authorities to raise tariffs.  However, 
applied tariffs have come down in successive a nnual budget exercises to a relatively low average 
applied MFN rate of 8.1% in 2005, the notable ex ception being the automotive sector.  Tariff quotas, 
while technically in place, are not used in practi ce.  Patterns of MFN tariff dispersion and escalation 
have changed little since 2001.  One notable feature of  the review period is that Malaysia has joined 
the trend of negotiating bilateral and regional agreements.  These FTAs are likely to lead to tariff 
reductions by Malaysia on a preferential basis and a dversely affect suppliers who rely on MFN access 
to the Malaysian market.  
3. Apart from import prohibitions applied for na tional security, religious or environmental 
reasons, Malaysia makes use of various non- tariff border measures.  Although imports and 
domestically produced goods are generally treated in the same way as rega rds excise duty, an 
exception for national car manufacturers amounts to a substantial non-tariff ba rrier.  Approximately 
27% of Malaysia's tariff lines are subject to impor t licensing, most of which is non-automatic;  this 
would seem to provide the authorities with scope to encourage or discourage certain types of activity.  
Regarding contingency measures, Malaysia has b ecome quite active, initiating 17 anti-dumping 
actions during the review period;  it has been the ta rget of 26 anti-dumping investigations.  Malaysia 
is also planning to develop safeguard legislation. 
4. In line with its WTO liberalization commitmen ts, in 2003 Malaysia phased out all remaining 
trade-related investment measures as well as local-c ontent requirements in the automotive industry.  
Preferential government procurement procedures c ontinue to be used to favour locally owned 
businesses;  international tenders are invited only if goods and services are not available locally.  
Malaysia is not a party to the WTO Plurila teral Agreement on Government Procurement. 
5. Export duties and export promotion measures conti nue to play a central role in Malaysia's 
industrial policy.  Export taxes and extensive licen sing arrangements are applied to certain exports 
such as timber, which has the effect of discourag ing the export of those goods and reducing their 
domestic prices.  The aim of such measures, accordi ng to the authorities, is to foster the development 
of downstream industries, which provide value-added content.  At the same time, the various export 
assistance measures, include exem ptions/drawbacks for import duties, tax relief, export processing 
zones, concessionary credits, insurance, and guarantees, as well as government-sponsored promotion 
and marketing assistance.   
                                                      
1 In 1971, the Malaysian Government instituted the 20-year New Economic Policy (NEP), a 
programme for development, which strived for greater economic well-being for the ethnic Malays or 
"bumiputeras".  The most recent replacement, the Nati onal Vision Policy (NVP) outlines the general thrust of 
development policy;  its objectives are contained in the third Outline Perspective Plan (OPP3, for 2001-10). WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 34 
 
 
6. Standards and standardization activities are among Malaysia's priorities for achieving 
developed nation status by 2020.  Malaysia aims to align Malaysian standards with international 
standards;  as of May 2005, some 51% of Malays ian standards were aligned, up from 35% in 2001.  
Malaysia has had much success in the development of  halal certification, reflecting the Government's 
objective of making the country a hub for halal f ood products;  the UN Code x cited Malaysia as the 
best global example for halal food production. 
7. Tax incentives have long been an important inst rument of Malaysia's economic development 
strategy.  Direct and indirect tax incentives apply to investments in the manufacturing, agriculture, 
tourism and approved services sectors, R&D, training,  and environmental protection activities.  No 
estimates have been made available of total tax revenue forgone as a result of these incentive 
schemes.  Experience in other countries suggests,  however, that tax incentives are rarely cost-
effective.  The publication of estimates of tax re venues forgone as well as studies evaluating the cost 
effectiveness of incentives would improve fiscal tran sparency in Malaysia and contribute to a more 
effective tax policy. 
8. Government-Linked Companies (GLCs) continue to  play an important role in the Malaysian 
economy through the provision of essential services such as transportation, energy, 
telecommunications, and financial services.  According to the Government, GLCs serve a pivotal role in the operation of every commercial concern in Malaysia and improving their performance would 
have beneficial effects on the competitiveness of the economy.   
9. In line with its TRIPS commitments, and consiste nt with its policy of creating an attractive 
climate for investment and technology transfer, the Malaysian Government has strengthened its 
intellectual property regime and has made determined  efforts to improve enforcement, although piracy 
and counterfeiting seem to remain problems. 
10. Malaysia does not have a comprehensive competiti on law, but has a target of drafting a broad 
competition law by the end of 2005. 
11. During the period under review, the author ities have emphasized the improvement of 
corporate governance.  Requirements for companies to  be listed on the Stock exchange were revised;  
the Capital Markets Master Plan was established to set out the strategy for corporate sector reform, 
including governance;  and GLCs are being r estructured and subjected to performance-based 
assessments in an effort to make them more comm ercially oriented and encourage greater private 
investment in them. 
(2) M
EASURES DIRECTLY AFFECTING IMPORTS  
(i) Customs issues, trade facilitation, customs valuation, and rules of origin  
12. The Royal Malaysian Customs (RMC) administers Malaysia's customs laws.  The RMC states 
its core business as revenue collection and its mission is to collect duties and taxes efficiently and to 
promote the development of trade and industrial sec tors through customs facilitation, as well as to 
ensure compliance with legislation to safeguard econom ic, security and social interests.  Malaysia is 
currently in the process of accession to the Worl d Customs Organization Revised Convention on the 
Simplification and Harmonization of Customs Pro cedure, which provides the basis and practical 
guidance for the implementation of GATT pr inciples governing customs formalities and 
administration.  Malaysia WT/TPR/S/156/Rev.1 
 Page 35 
 
 
(a) Facilitation 
13. Since Malaysia's last Trade Policy Review, Customs has worked to facilitate trade, 
particularly in the Asia-Pacific region, by si mplifying and harmonizing its customs procedures.  
Malaysian Customs is committed to undertaking trade facilitation measures and seeks their 
introduction by its trading partners.2  Of particular significance is Malaysia's shift from clearance-
based controls to post-clearance audit controls, as well as efforts to coordinate the activities of the 
various agencies involved in border control.  The Customs Department has e ngaged in an intensive 
review of its Customs Act to further simplify a nd harmonize its legislation in line with APEC and 
ASEAN programmes.  Malaysia and Thailand are work ing jointly to develop shared customs control 
on their borders including the use of joint documentation. 
14. During the review period Malaysia has implem ented paperless export transactions in major 
ports and airports;  it is planning to develop a customs portal to provide information as well as 
customs-related services over the Internet;  and it has adopted systematic ri sk management techniques 
to identify low-risk goods for automatic release.  Risk assessment is based on information obtained 
from previous records of post-audit and preventiv e cases.  A Customs Intelligence Centre (CIC) was 
established in August 2003 to coordinate all info rmation and intelligence compiled from domestic and 
foreign sources.  All import and export declaration information3 is collected and analysed to help 
identify low risk goods.  Other important initiativ es include the March 2004 implementation of the 
Container Security Initiative to facilitate the moveme nt of goods and enhance legitimate trade, and the 
development of a Trade Facilitation Portal to provi de a common web-based platform for the trading 
community.  
15. RMC uses a variety of methods to combat smuggling, focusing on high risk goods and 
companies, including post-audit clearance, scanning de vices, drug detection, and ICT tools.  Malaysia 
has temporary importation facilities and has accede d to the Convention on Temporary Admission of 
goods (ATA Convention).  The RMC is currently re viewing the Customs Act and is considering the 
establishment of a customs tribunal.  Provisions pert aining to appeals are currently  prescribed in the 
Customs Act.  A web-based data system, whic h provides search facilities based on description and 
tariff is available to all customs officers and clie nts through the RMC website.  Malaysian Customs 
has implemented the selectivity release system, au to release system, advance ruling and the use of 
high technology applications such as the use of X-ray machines at entry points.  RMC has also 
developed an Integrity Action Plan, including tr aining and seminars for staff and clients.  
16. Malaysian law allows for the establishment of  free trade zones and licensed manufacturing 
warehouses (LMWs);  it does not discriminate betwee n domestic and foreign companies.  Imports of 
raw materials and components used in the manufactur e of goods for export are not subject to customs 
duties unless these goods are introduced into Malaysian customs territory. 
                                                      
2 The experiences of Royal Malaysian Customs with  trade facilitation were discussed at the APEC 
Workshop on the WTO Trade Facilitation Negotiations held in Kuala Lumpur on 1-2 March 2005.  See WTO 
documents TN/TF/W/27 and TN/TF/W/50.  
3 Importers and exporters of goods, and manufacturers of excisable goods are required to submit 
Customs and Excise declaration forms and other supporting documents in metric measures.  All goods to be 
imported or exported must be declared on prescribed forms:  Custom Form No. 1 is for goods to be imported;  Customs Form No. 2 is for goods to be exported;  Customs Form No. 3 is the application/permit to transport 
goods within the Federation;  Customs Form No. 8 is the application/permit to tranship/remove goods;  Customs 
Form No. 9 is for partial release in any warehouses.  Supporting documents required are:  delivery order, 
packing list, original invoice, bill of lading, certif icate of origin, and import licences where required. WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 36 
 
 
(b) Customs valuation 
17. Malaysia has been implementing the WTO va luation system since 1 January 2000 and, 
according to the authorities, the necessary amendmen ts have been made to the Customs Act and to 
relevant customs regulations.  Imports are valued on  a c.i.f. basis and exports on a f.o.b. basis.  A 
post-clearance audit unit has been set up at HQ and at regional offices, and training on WTO 
valuation and post-clearance audit for senior and juni or customs officers is on-going.  However, the 
under-statement of the value of imports has been wide ly reported in the Malaysian press, in particular 
with regard to imports of cars.  The Government  has reportedly announced that a number of cases are 
under investigation by Customs and that Malaysia lo st an estimated RM 1 billion to such commercial 
fraud.  
(c) Rules of origin 
18. Malaysia has no national law governing rules of or igin for imports.  It applies non-preferential 
rules in accordance with the WT O agreement on Rules of Origin and is committed to finalizing 
negotiations on the work programme for the harmoni zation of non-preferential rules.  Malaysia  
maintains preferential rules of origin in resp ect of the ASEAN CEPT.  The CEPT scheme grants 
preferential tariffs to ASEAN countries under the following conditions:  that the product is wholly 
produced or obtained in these countries;  that at least 40% of the f.o.b. value of the product is produced or obtained or finally processed in the exporting country and the aggregate or cumulative ASEAN content of the final product is not less than 40%  of f.o.b. value.  The base used to determine 
the 40% content in the finished product are raw mate rials, labour, and overhead costs.  To be entitled 
to preferential status, the authorities of the expor ting country are responsible for providing legal 
documentation.  
(ii) Tariffs 
19. Malaysia extends at least MFN treatment to all of its trading partners while providing tariff 
preferences to ASEAN countries.  The simple averag e applied MFN tariff rate is approximately 8.1%  
in 2005 compared with 9.2% in 2001;  the simp le average bound rate is 16.2% (Table III.1).  
According to the authorities, Malaysia will continue to review and reduce tariff rates in line with its 
objective of achieving a more open and liberal economy, improving allocative efficiency, and 
enhancing the competitive environm ent for domestic industries.  
Table III.1 
Structure of MFN tariffs, 2001 and 2005 
(Per cent)  
   MFN 2001 MFN 2005 
1. Bound tariff lines (% of all tariff lines) 63.5 63.5d 
 WTO agricultural products .. .. 
 WTO non-agricultural products .. .. 
 Duty free tariff lines (% of tariff lines) .. .. 
 Non- ad valorem  tariffs (% of tariff lines) .. .. 
2. Simple average applied rate 9.2 8.1 
 Agricultural products (HS01-24) 3.5 3.2 
 Industrial products (HS25-97) 9.9 8.7 
 WTO agricultural products 3.3 3.2 
 WTO non-agricultural products 9.9 8.7 
 Textiles and clothing 15.3 12.6 
3. Domestic tariff "peaks" (% of all tariff lines)a 9.5 13.9 
4. International tariff "peaks" (% of all tariff lines)b 23.8 23.4 
Table III.1 (cont'd) Malaysia WT/TPR/S/156/Rev.1 
 Page 37 
 
 
   MFN 2001 MFN 2005 
5. Overall standard devia tion of tariff rates 19.4 12.6 
6. Coefficient of variation of tariff rates 2.1 1.6 
7. Tariff quotas (% of all tariff lines) 0.0 0.0 
8. Duty free tariff lines (% of all tariff lines) 58.1 57.8 
9. Non- ad valorem  tariffs (% of all tariff lines) 0.7 0.7 
10. Non- ad valorem  tariffs with no AVEs (% of all tariff lines) 0.7 0.7 
11. Nuisance applied rates (% of all tariff lines)c 0.2 0.2 
.. Not available. 
a Domestic tariff peaks are defined as those exceeding three ti mes the overall simple average applied rate (indicator 8). 
b International tariff peaks are defined as those exceeding 15%. 
c Nuisance rates are those greater than zero, but less than or equal to 2%. 
d MITI estimates.  The authorities say that  Malaysia is currently undertaking its own exercise of HS transposition from 96 to 2 002 
and hence, is unable to provide details of bound and unbound lines. 
Note: Calculations exclude sp ecific rates and include the ad valorem  part of alternate and compound rates.  The 2001 tariff is based on 
HS96 nomenclature and totalling 10,368 tari ff lines;  the 2005 tariff is based on HS 02 nomenclature totalling 10,581 tariff lin es.   
 WTO agriculture corresponds to HS Chapters 01-24 excluding Chapter 03,  HS codes 0509.00, 0511.91, 1504, 1603-1605 and 
2301.20, and including 2905.43, 2905.44, 2905.45, 3301, 3501-3505, 3809.10, 3823, 3824.60, 4101-4103, 4301, 5001-5003, 
5101-5103, 5201-5203, and 5301-5302.   
Source : WTO calculations, based on data provided by the Malaysian authorities.  
(a) Forms of tariff 
20. Currently Malaysia has two tariff classification systems, one for intra-ASEAN trade and the 
Harmonized System for trade with other countries co mmon up to the 6-digit level.  The maintenance 
of two systems appears to add a certain complexity to import transactions at a time when regional and 
global trading patterns are becoming increasingly integr ated.  Malaysia's intention is to eventually 
operate one classification system at the 8-digit level. 
21. The Malaysian customs nomenclature is based on the 2002 Harmonized System (HS).  There 
are 10,579 lines at the 9-digit level in the Malaysian tariff structure.  Malaysia intends to reduce the 
number of lines through continuing simplification and streamlining of import procedures, which 
should bring efficiency benefits.  Almost all rates (99.3%) are ad valorem ;  the remainder are specific, 
mixed or alternate duties.  An on- going exercise to convert these to ad valorem  duties has increased 
the transparency of Malaysia's tariff structure.  No current estimates of the ad valorem  equivalents 
(AVEs) for non- ad valorem  duties have been made available to the WTO Secretariat.  Given that such 
duties may conceal relatively high AVEs, the level of applied tariff protection could be higher than 
the simple average of all ad valorem  rates of 8.1% in 2005.   
22. The Government undertakes regular reviews of th e tariff structure and tariff rates through 
annual ad hoc dialogues with major industry players and the business community.  The Special 
Advisory Committee on Tariffs (SACT) under MITI r eceives and considers applications for tariff 
review, which may then be announced in the annual budget.   
(b) Tariff bindings 
23. There has been little change in Malaysia's tariff bindings since its previous Review.  Malaysia 
has bound about 63% of its tariff lines in its WTO schedule XXXIX.  Bindings are most prevalent for 
agriculture, food, and textile and clothing products .  Malaysia, like other developing countries, was 
given the flexibility at the end of the Uruguay Rou nd to determine the number of lines to be bound;  it 
says it will increase the binding coverage substantia lly in the current round of negotiations.  The 
relatively high proportion of unbound tariff lines cr eates a degree of unpredictability as there is 
significant scope for the authorities to raise tariffs. WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 38 
 
 
24. The final overall bound rate for Malaysia, accord ing to the CTS database, is 16.2%.  The 
bound rate was 11.9% for agriculture (HS 01-24) in 2004 and 17.1% for industrial products 
(HS 25-97).  
(c) Applied MFN tariff levels 
25. Since its previous Trade Policy Review, Malays ia has eliminated and reduced tariffs on a 
range of products.  Malaysia's 2005 budget included the abolition of import duty on surgical gloves, 
carpet, glassware, and semi-finished components for the wood-based industry, and the reduction of 
import duty on selected raw materials for the appare l industry and herbicides from a range of 10% to 
35% to a range of 5% to 30%.  Previous budgets eliminated the 10% import duty on health 
supplements and the 5% duty on quality paper and reduced or abolished import duties on selected 
goods such as computer batteries and wooden and plastic goods;  the 2002 budget cut the import duty 
on all motorcycles to 60% (from 80-120%) and redu ced duties on 55 products, including carbonated 
beverages, woven fabric, lace a nd blankets to 10-50% (from 20-105%).  The average applied MFN 
tariff (8.1%) is around half the average bound rate (16.2%);  the resulting gap imparts a degree of 
uncertainty to Malaysia's tariff as it provides ampl e scope for the authorities to raise applied tariff 
rates.  During the period under review, however, th e authorities have not taken advantage of this 
scope;  instead, applied MFN tariff rates have fa llen, thereby resulting in a widening of the gap 
between bound and applied rates (C hart III.1 and Table AIII.1). 
05101520253035404550
Live animal & prod.
Vegetable products
Fats and oils
Prepared food, etc.
Mineral prod.
Chemicals & prod.
Plastic & rubber
Hides & skins
Wood & articles
Pulp, paper, etc.
Textiles & articles
Footwear, headgear
Articles of stone
Precious stones, etc.
Base metals & prod.
Machinery
Transport equipment
Precision instruments
Arms & ammunition
Misc. manufactures
Works of art, etc.
TotalChart III.1
Simple average applied MFN tariff rates by HS section, 2001 and 2005
Per cent
Calculations exclude specific rates and include the ad valorem  component of alternate and compound rates.
WTO Secretariat calculations, based on data provided by the Malaysian authorities.Note:
Source :2001
2005
 Malaysia WT/TPR/S/156/Rev.1 
 Page 39 
 
 
(d) MFN tariff dispersion and escalation 
26. Judging from the standard deviation and coeffici ent of variation tariff rates are less dispersed 
in 2005 than in 2001.  By contrast, as a proportion of all tariffs "domestic tariff peaks" increased by 
over 50% during the same period.  The proportion of  tariffs exceeding 15% still accounts for nearly 
one quarter of all tariffs (Chart III.2). 
 
 0.1%7.5%6.8%4.6%4.5%58.1%
8.6%
7.2%
0.2%
 0.1% 
0.3%
1.6%3.2%  9.5% 
4.7%2.7%6.9%8.9%57.8%
5.2%
0.4%
0.4%
n.a.
0.1%01,0002,0003,0004,0005,0006,0007,000
Duty free >0-5 >5-10 >10-15 >15-20 >20-25 >25-30 >30-35 >35-40 >40-45 >45-50 >50
Not applicable.
Calculations exclude specific rates and include the ad valorem  component of alternate and compound rates.  
Percentages denote the share of total lines.  Totals do not add to 100% as no tariff rates are available for 0.3% 
(representing specific lines) for both 2001 and 2005.
WTO Secretariat calculations, based on data  provided by the Malaysian authorities.MFN 2001
MFN 2005Number of tariff linesChart III.2
Distribution of MFN tariff rates, 2001 and 2005
Tariff rates
n.a.
Note:
Source : 
27. Currently 57.8% of Malaysia's total tariff lin es are duty free.  The higher rates apply to 
protected sectors and luxury products.  Raw ma terials, machinery, essential foodstuffs, and 
pharmaceutical products are generally non-dutiable or s ubject to lower rates.  Tariff protection is high 
for automotives, textiles, clothing and leather, f ood and beverages, and imported goods that compete 
with local production.  Rates exceed 20% on 16.9% of tariff lines;  several lines have rates over 
100%.  In the case of iron and steel products, tariffs  on flat rolled steel products may reach 50%.  
Tariffs on automobiles and automotive components are still very high. 
28. The pattern of tariff escalation has changed little since 2001 (Chart III.3).  Malaysia's tariff 
protection is generally lower for raw materi als and increases depending on the category and 
value-added content.  Between 2001 and 2005, the gap between tariffs on products in the first stage of 
processing and semi-processed products increased, owing to a decline in tariffs on the former and an 
increase in tariffs on the latter.  The difference be tween tariffs on semi-processed and fully processed, 
however, decreased during the period (Table III.2).  At the sectoral level, tariff escalation has 
increased in paper, printing and publishing, and basic metal. WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 40 
 
 
n.a.n.a.0.02.55.07.510.012.515.017.520.022.525.0
Food,
beverages
and tobaccoTextiles and
leatherWood and
furniturePaper,
printing and
publishing Chemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machineryOtherChart III.3
Tariff escalation by 2-digit ISIC industry, 2001 and 2005
n.a.n.a.0. 02. 55. 07. 510.012.515.017.520.022.525.0
Food,
beverages
and tobaccoTextiles and
leatherWood and
furni turePaper,
printing and
publishingChemicals Non-metallic
mineral
products Basic metal Fabricated
metal
products and
machine ryOtherAverage applied rate
 in manufacturing
(10.9%)
Not applicable.
Calculations exclude specific rates and include the ad valore m component of alternate and compound rates.
WTO Secretariat calculations, based on data provided by the Malaysian authorities.n.a.
Note:
Sourc e:Per cent
First sta ge of processin g Fully processed Semi-processe dPer cent
Average applied rate 
in manufacturing
(9.6%)20052001
 Malaysia WT/TPR/S/156/Rev.1 
 Page 41 
 
 
Table III.2 
Applied MFN tariff averages by st age of processing, 2001 and 2005 
(Per cent) 
 2001 2005 
Raw materials 0.9 0.9 
Agriculture 0.5 0.4 
Mining  1.0 1.0 
Manufacturing 3.0 3.7 
Semi-processed 7.7 9.0 
Fully processed 13.6 10.4 
Note: Calculations exclude specific rates and include the ad valorem  component alternate and compound rates. 
Source:  WTO Secretariat calculations , based on data provided by the Malaysian authorities. 
(e) Tariff quotas 
29. Malaysia has 19 products (73 tariff lines) subject to tariff rate quotas (TRQs).4  The products 
include livestock and dair y products, tobacco, roun d cabbages, coffee, wheat and meslin flour, and 
sugar.  Malaysia is considering imposing out-of- quota rates on poultry, da iry products, eggs, round 
cabbages and swine products with effect from 2005.   Currently, the implementation of TRQs is 
suspended. 
(f) Tariff exemptions or concessi ons, duty refunds and drawbacks 
30. Subject to various conditions, exemptions from import duties are generally available for raw 
materials and components used in the manufact ure of goods for export and for machinery and 
equipment that are not available in Malaysia, but are used directly in the manufacturing process. 
Section 93 of the Customs Act 1967 provides for drawback of 90% of the customs duties paid on 
imports that are re-exported, subject to certain conditions.5  The RCM provides concessional tariff 
rates for a wide range of goods in line with Malays ia's commitments arising from negotiations with 
ASEAN partners.  
(g) Tariff preferences 
31. Tariffs on products originating in ASEAN and covered by the ASEAN CEPT are significantly 
lower than MFN tariffs.  The simple  average tariff rate for Malaysia's Inclusion List for the CEPT, 
which covers 97% of tariff lines is currently only 2.9%  and is scheduled to be 0% by 2010.  Malaysia 
has also agreed to transfer 218 lines on automotive products from the Temporary Exclusion List to the 
Inclusion List by 2008 (Chart III.4). 
32. Free-trade agreements involving ASEAN are also likely to leads to tariff reductions by 
Malaysia.  ASEAN's FTA with China, for example, requires the elimination of  most Malaysian tariffs 
on the "normal track" by 2010 and on the "sensitive track " by 2018.  Other agreem ents of this kind are 
being negotiated with India, Japan, Korea, and Au stralia/New Zealand.  These agreements, together 
with the bilateral agreements unde r negotiation, have the potential to  erode the competitive position of 
those suppliers who rely on MFN access to the Malaysian market.  
                                                      
4 The tariff rates are ad valorem  (58 tariff lines) ranging from 15% to 160% and specific (15 tariff 
lines) ranging from 5% + RM 50 to 5% + RM 220.46 (specific duty).  
5 Tariff exemptions and concessions are contained in:  Customs Duties (Exemption) Order 1998;  
Customs Duties (Goods of ASEAN Countries Origin) (Common Effective Preferential Tariff) (Exemption) 
Order 2002, applicable to Cambodia, Lao PDR, Viet Nam, and Myanmar only;  Excise Duties (Exemption) Order 1997;  and Sales Tax (Exemption) Order 1980. WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 42 
 
 
05101520253035
I IIIIIIV V VI VII
VIII IX X XI XII XIIIXIV XV XVI XVII XVIIIXIX XXXXIPer cent
HS Section
HS Section
I
II
III
IV 
V
VI
VII
VIII
IX
X
XI
XII
XIII
XIV
XV
XVI
XVII
XVIII
XIX
XX
XXIDescription
Live animals;  animal products
Vegetable products
Animal or vegetable fats and oils;  prepared  edible fats;  animal or vegetable waxes  
Prepared foodstuffs;  beverages, spirits and vine gar;  tobacco and manufactured tobacco substitutes
Mineral products
Products of the chemical or allied industriesPlastics and articles thereof;  rubber and articles thereof
Raw hides and skins, leather, furskins and articles thereof
Wood and articles thereof
Pulp, paper and articles thereof
Textiles and textiles articlesFootwear, headgear, umbrellas, sticks , prepared feathers;  artificial flowers;  articles of human hair
Articles of stone, plaster, cem ent or similar articles;  ceramic products;  glass and glassware
Precious stones;  pearls;  precious metals an d articles thereof;  imitation jewellery; coin
Base metals and articles thereof
Machinery, mechanical appliances and electric al equipment and parts and accessories thereof
Vehicles, aircraft, vessels and associated transport equipmentPrecision instruments;  clocks and watches;   musical instruments;  and parts thereof
Arms and ammunition; parts and accessories thereof
Miscellaneous manufactured articlesWorks of art, collectors' pieces and antiquesChart III.4
Applied AFTA tariff rates by HS section, 2001 and 2005
Calculations exclude specifi c duties and include the ad valorem  component of alternate and compound rates.
 WTO Secretariat calculations, based on da ta provided by the Malaysian authorities.Note:     
Source :AFTA 2001
AFTA 2005
Average applied
 AFTA rate (2005)
(2.9%)Average applied
 AFTA rate (2001)
(3.9%)
 
 Malaysia WT/TPR/S/156/Rev.1 
 Page 43 
 
 
33. Malaysia has completed the transfer of  all manufactured, processed, and unprocessed 
agriculture products into the CEPT scheme.  This  includes completely built-up and completely 
knocked-down automotive products effective 1 Janua ry 2005, although the Government has said it 
would further delay a complete harmonization of tariffs for the automotive sector from 2005 to 2008.  
The ASEAN-6 members have been implementing the ASEAN Integration System of Preferences 
(AISP) since 1 January 2002.  The scheme is aime d at assisting the less developed member countries 
(Cambodia, Lao PDR, Myanmar, and Viet Nam - CL MV) to bridge the development gap with the 
other members.  Under the AISP, the ASEAN-6 unila terally eliminate import duties on certain agreed 
products requested by CLMV.6  The scheme is implemented on a bilateral basis and the product 
coverage is regularly monitored and reviewed. 
34. In 2003, 98.8% of total tariff lines for the ASEAN-6, were in the Inclusion List for tariff 
reduction/elimination7;  they are essentially all manufactured and processed agricultural products and 
some unprocessed agricultural products.  Of these, 95.55% have duties betwee n 0-5%.  Malaysia has 
progressively transferred 10,116 products into the Inclusion List since 1993;  they constitute 97.32% 
of Malaysia's total tariff lines, of which 99.26% ha ve import duties of not more than  5% and 60.3% 
are duty free.  The Government reviews, and c ontinues to exclude, items from the CEPT on grounds 
of protection of national security, protection of  human, animal, and plant life and health, and 
protection of articles of cultural and archaeological  value.  Rice also rema ins a sensitive product for 
which the tariff is to be determined by each country individually.  
(h) Other charges affecting imports8 
35. Imports are generally treated in the same way as domestically produced goods and services as 
regards indirect taxes (sales tax, excises).  The ma in exception is the 50% rebate of excise duty for 
national car manufacturers, which cons titutes a substantial non-tariff barrier. 
(iii) Prohibitions, quantitative restrictions, and import licensing  
36. The Customs (Prohibition of Imports) Order 1998 contains four schedules of items that are 
subject to various levels of restriction.  The first schedule includes 14 prohibited items banned for 
religious, security, health, and environmental r easons.  The second schedule lists products requiring 
licences, mainly for health, sanita ry, security, environmental protection or intellectual property 
reasons.  Products include poultry and beef (which mu st come from facilities that have been approved 
as halal, or acceptable to Muslim consumers), eggs, rice, sugar, cement clinker, fireworks, magnetic 
tapes for video and audio recording, explosiv es, wood, safety helmets, diamonds, rice-milling 
machinery, colour copying machines, some tel ecommunications equipment, arms and ammunition, 
and saccharin.  An import licence requirement on construction equipment and the agricultural, 
mineral, and motor vehicle sectors, is designed to protect strategic and infant industries from import 
                                                      
6 Malaysia includes 89 products for Cambodia, 12 for Lao PDR, 282 for Myanmar, and 170 for 
Viet Nam, covering agriculture, electric and electrical, wo od, plastics, ceramics, and articles of iron and steel.  
Malaysia is in the process of considering new reques ts from CLMV to include additional products for tariff 
preference under the AISP. 
7 There are four categories of products listed under  AFTA:  the Inclusion List, Temporary Exclusion 
List, Sensitive and Highly Sensitive List (with a longer time frame for transfer into Inclusion List), and the 
General Exception List for products permanently exempted from liberali zation.  ASEAN online information 
available at:  http://www.aseansec.org. 
8 Duties, taxes and other charges levied on import ar e as stipulated in the following legislation:  
Customs Duties Order 1996;  Customs Duties (Goods of ASEAN Origin) ASEAN Harmonized Tariff Nomenclature and Common Effective Preferential Tari ff) Order 2004 (for ASEAN only);  Customs Duties 
(Goods under the Early Harvest Programme) (F ramework Agreement on Comprehensive Economic 
Co-Operation between ASEAN and  China) Order 2004 (for ASEAN and China only);  Excise Duties Order 
2004;  Sales Tax (Rates of Tax) Order 1997. WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 44 
 
 
competition.  For example, all imports of heavy machinery for construction need approval from MITI, 
which will be given only if this machinery is not available locally.  Other industrial products subject 
to discretionary import licensing include a range  of telecommunication and chemical products;  
agricultural products include rice and rice products.  The third schedule, covering items subject to 
temporary import restrictions to protect a domestic  industry, includes milk, coffee, cereal flours, 
certain wire and cables, and some iron and steel pr oducts.  The fourth schedule contains items that 
may be imported only after meeting specific criteria;  these include animals, animal products, plants, plant products, cigarettes, soils, fertilizers of animal  origin, bullet-proof vests, electrical apparatus, 
safety belts, and imitation weapons.   
37. MITI oversees a system of approved permits that  allows the holder to import foreign-built or 
assembled cars, and foreign-built trucks and motorcyc les, and distribute them locally.  The system, 
which was primarily designed to promote the dom estic automotive industry and provide bumiputera 
companies access to car distributi on and services, acts as a quota restricting the number of cars that 
can be imported in a given year.  Many of the perm its may be sold for profit and the associated costs 
passed on by auto dealers to Malaysian consumers,  further raising the costs of imported vehicles.
9 
38. The authority for granting import licences rests with Royal Customs Malaysia10, under the 
Ministry of Finance.  MITI, along with other specifi ed authorities (the Ministry of Primary Industries, 
the Malaysian Timber Board, the Department of Agriculture, and the Veterinary Department), is 
responsible for the day-to-day administration of im port licensing throughout Malaysia (Table AIII.2).  
According to data provided by the Malaysian authorities (Chart III.5), approximately 27% of 
Malaysia's tariff lines (principally with regard to  animal and vegetable products, wood, machinery, 
vehicles and transport equipment, and arms) are still subject to import licensing.  It is not clear how 
much of this is non-automatic import licensing, designed to protect import-sensitive or strategic 
industries.  The list of products subject to import licensing requirements remains unchanged since 
Malaysia’s previous Review.11  During the review period, Malaysia has participated in the WTO 
Committee on Import Licensing Procedures but has not made any notifications since 1999.  
(iv) Contingency measures  
39. There have been no changes to the Countervailing and Anti-Dumping Duties Act 1993 or the 
Countervailing and Anti-Dumping Duties Regulatio ns 1994 since 2001.  The current Anti-Dumping 
legislation is in line with the WTO Anti-Dumping and Countervailing Agreemen t.  Under this Act, 
actions can be taken against imports when a petiti on is received from an injured party in a domestic 
industry.  Information on investigations and deci sions are available through MITI's website and the 
national printer's website (lawnet.com.my).  All inte rested parties and the relevant governments of the 
countries concerned are given copies of the findings of the investigation.   
40. Malaysia has imposed a number of anti-dumping duties during the review period, but has also 
rejected domestic appeals for relief.  It initiate d 17 anti-dumping investiga tions, over half of them 
against Indonesia, Korea, and Chinese Taipei, of which ten resulted in definitive measures 
(Table III.3).  Regarding the most recent actions, in  early 2005, MITI announced that the Government 
had completed its anti-dumping investigation on im ports of maleic anhydride from several companies 
from Chinese Taipei, Indonesia, and Korea, under se ction 25 of the Countervailing and Anti-Dumping 
Duties Act 1993, and confirmed that dumping had oc curred and the domestic industry was materially 
injured.  Definitive anti-dumping duties were implem ented for not more than five years, effective 
4 February 2005.  
                                                      
9 Wall Street Journal , 10 November 2004, "Malaysia to lower car import tariffs". 
10 Royal Malaysian Customs online information.  Available at:  http://www.customs.gov.my/html/eng/ 
pelabur.asp?category=4&id=-1. 
11 See WTO (2001), Table AIII.4. Malaysia WT/TPR/S/156/Rev.1 
 Page 45 
 
 
0102030405060708090100
I II III IV V VI VII VIIIIX X XI XII XIII XIV XV XVI XVII XVIIIXIX XX XXIPer cent
HS Section
HS Section
I
II
III
IV 
V
VI
VII
VIII
IX
X
XI
XII
XIII
XIV
XV
XVI
XVII
XVIII
XIX
XX
XXIDescription
Live animals;  animal products
Vegetable productsAnimal or vegetable fats and oils;  prepared edible fats;  animal or vegetable waxes  Prepared foodstuffs;  beverages, spirits and vinega r;  tobacco and manufactured tobacco substitutes
Mineral products
Products of the chemical  or allied industries
Plastics and articles thereof;  rubber and articles thereofRaw hides and skins, leather, furskins and articles thereofWood and articles thereofPulp, paper and articles thereofTextiles and textiles articlesFootwear, headgear, umbrellas, sticks, prepared feat hers;  artificial flowers;  articles of human hair
Articles of stone, plaster, cement or similar articles;  ceramic produc ts;  glass and glassware
Precious stones;  pearls;  precious metals and articles thereof;  imitation jewellery; coin
Base metals and articles thereofMachinery, mechanical appliances and electrica l equipment and parts and accessories thereof
Vehicles, aircraft, vessels and associated transport equipment
Precision instruments;  clocks and watches;   musical instruments;  and parts thereof
Arms and ammunition; part s and accessories thereof
Miscellaneous manufactured articlesWorks of art, collectors' pieces and antiquesChart III.5
Import licensing by HS section, 2001 and 2005
Source :   Data provided  by the Malaysian authorities.Percentage of all tariff lines subject to 
import licensing in 2005
(26.9%)2001
2005
Percentage of all tariff lines subject to 
import licensing in 2001
(27.3%)
 
 WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 46 
 
 
Table III.3 
Summary of anti-dumping actions, 2001-05 (June) 
Exporting country Product Final measure 
(a)  Actions by Malaysia    
Canada Newsprint 1 
China, P.R. Bicycles 1 
Chinese Taipei Maleic anhydride;  polyethylene terephthalate (PET)b 1 
Hong Kong, China Bicycles 1 
India Carbon black 0 
Indonesia Self-copy paper;  gypsum boarda;  maleic anhydride;  polyethylene 
terephthalate (PET)b 2 
Korea, Rep. of Newsprint;  maleic anhydride ;  polyethylene terephtalate (PET)b 2 
Philippines Newsprint 1 
Thailand Carbon blacka, polyethylene terephthalate (PET)b 0 
United States Newsprint 1 
Total  10 
(b)  Actions against Malaysia    
Argentina Fabricsb 0 
Australia High density polyethylene;  steel sections hollowa 1 
Canada Cold-rolled steel sheeta 0 
China, P.R. Acrylates;  ethanolamine 2 
Colombia Textured polyester yarna 0 
European Communities Tube and pipe fittings;  disposable pocket lightersa;  stainless steel 
fasteners and partsb 1 
India Polyester staple fibre;  oxo-al cohols;  thermal sensitive paper;  
compressorsb  3 
Indonesia Calcium carbide;  paper,  uncoated white cut ream copy 2 
New Zealand Reinforcing bar (steel)a;  galvanized wire 1 
Pakistan Polyester filament yarnb 0 
South Africa Stainless steel tubes and pipesb 0 
Thailand Cathode ray tubesb 0 
Turkey Vulcanized rubber thread;  polyethylene terephthalate (PET)b 1 
United States Certain circular welded carbon steel pipes and tubesb;  colour 
television receiversa;  polyethylene retail carrier bags 1 
Total  12 
a Final determination is negative. 
b Under investigation. 
Source:  WTO Secretariat, based on information supplied by the Malaysian authorities. 
41. In the same period, 26 anti-dumping investigati ons were initiated agains t Malaysian products;  
a considerable number of cases are on-going.  Among the markets where Malaysian exports were 
subject to anti-dumping duties in 2004 were United States, China, and India. 
42. Currently, there is no safeguard legislation in Malaysia, but MITI has expressed its intention 
to develop such legislation.  
(v) Government procurement  
43. The Malaysian Government is an important pur chaser of goods and services.  According to 
the annual budget allocation (Table III.4), the government procuremen t market was estimated to be Malaysia WT/TPR/S/156/Rev.1 
 Page 47 
 
 
worth RM 92.7 billion or 20.6% of GDP in 2004, of which over RM 49 billion was federal 
government expenditure on supplies and services, an d development.  A further RM 33.5 billion was 
expenditure by non-financial public enterprises (GLC s).  The scale of government procurement  in 
Malaysia provides a great deal of scope for its use as an instrument of economic policy. 
Table III.4 
Government procurement, 2001-04 
(RM million) 
 2001 2002 2003 2004 
Federal Government expenditure on supplies and 
services 10,703 11,269 13,968 18,133 
Federal Government developmen t expenditure 35,235 35,977 39,353 31,131 
State Government development expenditure 4,704 3,772 3,817 4,710 
Local Government expenditure 2,176 2,322 2,482 1,931 
Statutory bodies development expenditure 3,088 3,841 4,180 3,374 
Non-financial public ente rprises 24,033 32,297 40,160 33,454 
Total 79,939 89,478 103,960 92,733 
Source: Estimated from Ministry of Finance, Economic Report 2004/2005 , Annex tables 4.4, 4.6, 4.10, 4.11, 4.12 and 4.13.  
Available at:  http://www.trea sury.gov.my/le2005/le-05.htm. 
44. Malaysia's government procurement policy is consistent with the national policy of nation-
building.  It is used to support national objectives such as encouraging greater participation of the 
bumiputeras (indigenous Malays), in the economy, tr ansfer of technology to local industries, reducing 
the outflow of foreign exchange, creating opport unities for local service-oriented companies, and 
enhancing export capabilities.  Mala ysia has participated in the WTO Working Group on transparency 
in government procurement, but is not a party to the plurilateral WTO Government Procurement 
Agreement;  it intends to maintain  its requirement for all government agencies to procure supplies and 
services from local sources.  International tenders will be invited only if goods and services are not 
available locally.  Bumiputera tenders receive preferential treatment, which varies from 10% for 
contracts of RM 100,000 to 2.5% for contracts of over RM 15 million.  Locally produced goods 
receive a preference of 10% for contracts below RM  10 million and up to 3% above this value.  The 
Malaysian authorities have pointed out that tenders  will be invited only from local manufacturers and 
therefore Bumiputera manufacturers will not be comp eting with international bidders.  Where local 
contractors do not have the requisite expertise and capability, agencies may call for joint-venture bids 
(between local and foreign contractors) to encourag e the transfer of technology.  For projects funded 
by foreign sources, procedures for tenders are as stipulated by the respective sources.  
45. The Ministry of Finance has main responsib ility for government procurement issues.  The 
Ministry's government procurement management division undertakes open local tenders for items 
such as office supplies.  Government agencies, both federal and state, are then required to purchase 
those goods from the successful bidder.  All goods and services tenders in excess of RM 30 million 
and works (such as construction or engineering ser vices) over RM 50 million must be referred to the 
Ministry of Finance for decision.  Tenders belo w these thresholds can be considered by Tender 
Boards in each federal government ministry.  Government-linked companies (GLCs) require 
government approval for purchases exceeding defined limits and, for example, Petronas, Telecom Malaysia, Tenaga Nasional have to refer to th e Ministry of Finance when procuring goods and 
services valued at or exceeding RM 100 million.   The Government encourages GLCs to follow 
government policies on procurement as far as possible.  
46. Regarding the legal and regul atory framework, the Government Contract Act 1949 provides 
legal validity for the ministries to represent the Go vernment in engaging contracts and the Financial WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 48 
 
 
Procedure Act 1957 outlines the mode of control and management of public finances.  The latter lays 
out procedures for the collection and payment of public monies as well as procedures for the 
purchase, custody and disposal of public property.  In addition, government procurement is regulated 
by treasury instructions, treasury circulars, and central contract circulars.  
47. Malaysia aims to achieve a high standard of transparency in its procurement policies and 
practices;  it subscribes to the elements agreed upon in the Non-Binding Principles and to the APEC 
Transparency Standards.  All agencies are require d to procure all supplies, services and works above 
RM 200,000 through open tenders.  To ensure transp arency, tenders must be advertised widely in 
local daily newspapers, agencies' websites and on the myGovernment Portal.  In 2000, the 
Government introduced an electronic procurement (eP) system, an on-line system designed to 
encourage competition among contractors and to exped ite the procurement processes.  The eP system 
also aims to reduce bidding costs and make the pro cess more efficient and transparent;  it is in the 
second phase of implementation.  In 2004, the Treasury launched quotation and tendering modules in 
14 selected ministries on a pilot basis. 
(vi) State trading  
48. As was the case at the time of its last Revi ew, the only state trading enterprise within the 
meaning of Article XVII:4(a) of GATT 1994 is  Padi National Berhad (BERNAS), which was 
established in 1994.  BERNAS, the successor of th e national Paddy and Rice Board, was given the 
sole right to import rice for a period of 15 years with effect from 1996.  In addition to importing rice, BERNAS also performs social obligations on behalf  of the Government, such as maintaining a rice 
stockpile, purchasing paddies from farmers, and acting as a buyer of last resort for paddy farmers.  It 
also operates its own mills and regulates retail rice prices.  
(vii) Trade-related investment measures and local-content requirements  
49. In line with Malaysia’s commitments under the WTO TRIMs Agreement, Malaysia phased 
out all TRIMs at the end of 2003
12;  it also phased out local-content requirements, which are linked to 
investment incentives.  The local-materials conten t policy for the automotive industry was phased out 
at the end of 2003.  There is no specific legislation or regulation on local content. 
50. During the period under review, Malaysia con tinued to implement various programmes to 
promote the establishment of backward linkages, or  to develop small and medium-sized enterprises, 
such as the Industrial Linkage Programme (ILP) a nd the Vendor Development Programmes.  There 
have been no major changes in the policies and in centives under ILP since 2001.  The ILP is a cluster-
based industrial development programme aimed at promoting and developing  SMEs into reliable 
suppliers of parts, components, and services to leading industries.  The programme comprises tax 
incentives as well as support for industrial linkages su ch as technology development, skills upgrading, 
export and market development, a nd provision of SME industrial sites.   Targeted industry groups are 
electrical and electronics, transport equipment, m achinery engineering and resource-based products.  
Although these programmes do not require the use of local materials and services, they promote the 
use of these inputs through financial, technical, and other related assistance.  
                                                      
12 Under Article 5.3 of the TRIMs Agreement, th e Council for Trade in Goods may extend the 
transition period at the request of an individual deve loping country member that demonstrates particular 
difficulties in implementing the provisions of the Agreement.  In July 2001, Malaysia was one of 
eight developing countries granted an extension of  the transition period until the end of 2001;  in 
November 2001, the CTG granted additional extensions to these Members for periods up to end 2003.  Malaysia WT/TPR/S/156/Rev.1 
 Page 49 
 
 
(viii) Other measures  
51. The Malaysian authorities are not aware of any im port or export cartels.  They maintain that 
there has been no significant change in Malaysia's policy on countertrade since 2001.  During the period under review, the Government has engage d in a number of countertrade deals involving 
Malaysian exports of palm oil, including:  an arrangement with North Korea on steel blades worth 
US$1.4 million;  a project to purchase locomotives from General Electric valued at US$64.5 million;  a deal with the Indian firm Ircon for a southern sector railway project valued at US$129 million;  and 
an on-going project with the China National Cer eals, Oils and Foodstuffs Corporation, since 
December 2003, worth US$58 million.  
(3) M
EASURES AFFECTING EXPORTS  
52. There have been no major changes to export procedures in Malaysia since 2001.  All goods 
for export must be declared on Customs Form No. 2.   Specific export registration requirements appear 
to be restricted to local production of cocoa, pin eapples, palm oil and relate d products, and rubber.   
(i) Export taxes, charges, and levies 
53. Export duties are generally imposed on Mala ysia's main commodities, such as crude 
petroleum and palm oil.  Out of 10,580 tariff lines, 512 lines are subject to export duties, the majority 
being in 15-20% range.  The purpose of Malaysia's export duties is to discourage the export of raw 
materials and to encourage downstr eam activities in the country.  For example, a 5% export duty is 
levied on cockles (molluscs), live ca ttle, buffaloes, goats, and wild animals and birds.  In this area, 
Malaysia's level of self-sufficiency is considered to be low and the export of wildlife is discouraged 
for conservation purposes.  
54. Export duties are also imposed to fund research  and development and promotion activities for 
commodities in downstream and upstream industries a nd to maintain an adequate supply of certain 
goods in the domestic market.  Currently export du ties are 15% on logs and range from 10% to 30% 
for crude palm oil, based on tonnage.  The Governme nt imposes an export levy on selected species of 
sawn timber to ensure an adequate supply for timber-based industries and for research and 
development.  Rubberwood was subject to an e xport quota and, in June 2005, the Government 
imposed an export ban;  this indirect support to  domestic users is to assist the development of 
downstream industries, the domestic furniture  makers, which provide  value-added content.13  T h e  
previous export ban on this species was in  1999-00, but it was lifted to allow rubberwood 
manufacturers, and particularly the sm allholders, benefit from export earnings. 
55. With the exception of crude petroleum, which is subject to a flat rate duty of 20%, duties on 
commodities are based on the "cost plus" concept:  the duty is only imposed on the excess over a 
threshold price that reflects the cost of production.   No export duty is collected when the price falls 
below the threshold.  In September 2003, export du ties were reduced for 41 items and abolished for 
another 208 items.  
                                                      
13 The 1997 TPR of Malaysia pointed out that although the main rationale behind export 
duties/restrictions is to encourage downstream processing, some export taxes and levies, including those on logs, 
also appear to be justified by the authorities on the ground s that they take into account the social costs associated 
with the environmental damage caused by the production/harvesting of specific products, such as trees.  
However, as the environment damage is the consequence of the production of the timber rather than its export, 
production levies would be a more efficient way of corre cting the environmental externality than export duties 
(WTO, 1998, Chapter III). WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 50 
 
 
(ii) Export prohibitions, restrictions, and licensing 
56. The Customs (Prohibition of Exports) Order 1998, under the Customs Act 1967, sets out 
export control requirements in three schedules.  The fi rst schedule consists of ite ms that are absolutely 
prohibited from being exported, for example exports  to Haiti of petroleum and petroleum products, 
arms and related materials of all types, incl uding weapons and ammunition, military vehicles and 
equipment, police equipment, and spare parts.  Expo rts of turtle eggs are prohibited as are exports of 
rattan from peninsular Malaysia.  
57. The second schedule comprises goods subject to export licensing.  Licences are required for 
all exports to Israel, and for 43 product groups.14  The third schedule consists of items that can be 
exported only after meeting certain criteria for th e protection of wildlife, health, security, and 
antiquities.  MITI and the Ministry of Domestic Trade and Consumer Affairs administer licences for most of the controlled goods.  
58. In 2001, 36% of Malaysia's tari ff lines were subject to expor t licensing requirements;  this 
level does not appear to have changed, although curre nt data were not provided.  The list of products 
subject to export licensing requirement also appears to be identical to that of 2001.
15 
59. The authorities are not aware of any export cartels and indicate that no voluntary export 
restraints are maintained in Malaysia.  
(iii) Duty and tax concessions  
60. Duty and sales tax exemptions are granted on im ports of all raw materials/components used 
directly in the manufacture of approved products  for export, including packaging materials and 
casings.  Section 93 of the Customs Act 1976 provides for drawback of 90% of the customs duties 
paid on goods that are imported and then re-expor ted.  A drawback on import duty, sales tax, and 
excise duty paid may be claimed by a manufacturer if the parts, raw materials or packaging materials are used in the manufacture of goods for export within  a year.  The system of calculation of drawback 
was not provided to the Secretariat. 
(iv) Free-trade zones and other measures 
61. Malaysia has a number of free-trade zones for which the policy is overseen by Malaysian 
Customs.  The zones are established to facilitate operations of export-oriented companies, which 
export all or almost all their products.  Free z ones are established under the Free Zones Act 1990 and 
the Free Zones Regulations 1991 and consist of  two types:  free industrial zones (FIZs)
16, primarily 
for manufacturing companies that produce or ass emble products mainly for export;  and free 
commercial zones17, for commercial activities.  FIZs enable export-oriented companies to enjoy 
minimal customs formalities and duty-free imports of raw materials, component parts, machinery, and 
                                                      
14 These groups include:  animals and animal products, fish, dairy products, rubber, palm oil products, 
pineapples, vegetables, rice, cocoa, minerals and ores, cement clinkers, Portland cement, metal wastes, some 
chemicals, cinematographic films, roofing tiles, timber, plywood veneer chips, waste paper, textiles, military 
clothing and equipment, bricks, tin ingot, sugar, iron and steel, and star fruit. 
15 See WTO (2001), Table AIII.5. 
16 There are free industrial zones fo r manufacturing industries, at Sungai Way, Hulu Kelang, Kinta, 
Jelapang II, Perai, Bayan Lepas, Sama Jaya, Telok Pa nglima Garang, Baru Berendam, Tanjung Klingand, Johor 
Port. 
17 The free commercial zones includ e Northport, Southport, Westport, Butterworth, Bayan Lepas, 
Kuala Lumpur International Airport, Rantau Panjang,  Pengkalan Kubor, Johor Port, Tanjung Pelepas, and 
Stulang Laut. Malaysia WT/TPR/S/156/Rev.1 
 Page 51 
 
 
equipment required directly in the manufacturing process, as well as minimal formalities in exporting 
their finished products.  Companies located within FIZs must export at least 80% of their production 
and use mainly imported raw materials/components. 
62. In areas where FIZs are neither practical nor  desirable, companies may set up licensed 
manufacturing warehouses (LMWs), which are accorded similar facilities.  
63. Commercial activities, including trading, gradin g, repackaging, relabelling, and transit are 
restricted to specifically designated free commercial zones.  Since 90% of Malaysia’s international 
trade is seaborne ports, shipping, and maritime-related services have an important role.  The Government has promoted Port Klang as a free comme rcial zone and a regional load and transhipment 
centre.  Goods that are brought into the customs te rritory from free zones are subject to the relevant 
domestic duties.  Free zones do not discriminate between foreign and domestic enterprises;  enterprises operating in these zones do not receive preferential income tax treatment.  
(v) Export subsidies 
64. Malaysia does not provide any direct export subsidies.  Malaysia is committed to the 
elimination of all forms of export subsidies on a ll agricultural products in the Doha Round of trade 
talks.  
(vi) Export finance, insurance, and guarantees 
65. Under the Export Credit Refinancing Scheme (ECR), exporters can obtain post-shipment 
financing for up to six months and preshipment fina ncing for four months.  Refinancing facilities are 
granted for up to 100% of export value (post-shipment ) and 95% of export order value, or up to 90% 
of the value of exports of the preceding twelve mont hs (pre-shipment facility).  Minimum financing is 
for RM 10,000 and the maximum is RM 50 million per exporter.  Preshipment ECR is advanced to manufacturers and agricultural producers to facilitate  production of export-eligible products or to 
trading companies to purchase intermediary produc ts domestically or for final products before 
shipment.  ECR is used mainly by exporters of palm oil, rubber, and te xtile products.  It was 
originally launched by Bank Negara in 1977 an d since 1998 has been administered by the EXIM 
bank, which disbursed RM 6.8 billion in ECR lo ans in 2004, representing an increase of 2.4% from 
2003.
18   
66. The Malaysian Export Credit Insurance Berhad (MECIB) provides export credit insurance at 
competitive rates, against non-payment by buyers arising from commercial and political risks.  A 
wholly owned subsidiary of I ndustrial and Technology Bank Mala ysia, MECIB provides commercial 
banks with coverage for losses against loans to exporte rs and suppliers.  All locally incorporated firms 
that export goods wholly or partly produced or  manufactured in Malaysia are entitled to MECIB's 
insurance facilities.  All locally incorporated ba nks may apply for MECIB export finance insurance 
cover and bond-indemnity support.  Tax incentives for exporters including double deductions in 
respect of expenses for:  overseas advertising and travel, supply of free samples abroad, promotion of 
exports, maintaining sales offices overseas, and researc h on export markets.  There is single deduction 
for export promotion;  eligible expenses are the co st of quality certification, patents, websites, and 
hosting potential export customers. 
(vii) Export promotion  
67. The Malaysian External Trade Development Cor poration (MATRADE) is Malaysia's official 
trade promotion agency, working to help Malaysian companies enter the international market and to 
                                                      
18 EIU (2005), p. 21.  WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 52 
 
 
connect overseas businesses with reliable suppliers of  Malaysian products and services.  Currently, 
the focus markets are China, west Asia and ASEAN;  sectors of particular interest include:  electrical 
and electronics; chemicals and chemical products;  optical and scientific equipment;  machinery, 
appliances and parts;  food;  rubber-based products ;  wood-based products;  palm oil-based products;  
building materials;  furniture;  and pharmaceuticals and herbal products.  Key services sectors are 
education, healthcare, construction, professional services, ICT, telecommunications, and franchise operations  
(4) M
EASURES AFFECTING PRODUCTION AND TRADE  
(i) Standards and other technical requirements 
68. Malaysia has a comprehensive framework for standards and conformance issues.  The 
Department of Standards Malaysia (DSM), unde r the Ministry of Science, Technology and 
Innovation, is the national standardization and accr editation body, established under the Standards of 
Malaysia Act 1996 (Act 549).  The main function of the Department is to promote standards, 
standardization, and accreditation as a means of advancing the national economy.  The DSM 
appointed SIRIM Berhad, a wholly government-o wned company, as the sole national standards 
development agency under the provisions of the Standa rds of Malaysia Act.  Under this arrangement 
the DSM is responsible for all policy matters w ith regard to standard ization and operational 
responsibility while technical matters are delegate d to SIRIM Berhad.  SIRIM Berhad organizes 
Malaysian representation in regional and intern ational standards bodies, acts as the WTO/TBT 
notification and enquiry point, and publishes, prints , sells, and distributes Malaysian standards.  There 
are a number of advisory bodies on standards, of wh ich the most important is the Malaysian Standards 
and Accreditation Council.  
69. In 2004, the DSM published the National Standa rds and Strategy Action Plan to provide a 
common approach to enhance Malaysia's standardization activities until the year 2020.19  This plan 
was approved by the Cabinet in October 2004, underscoring the view that standards and 
standardization activities are one of the priorities in  the nation's efforts to achieve developed nation 
status by 2020.  According to the DSM, the ultimate goal of the plan  is to ensure wider awareness and 
application of Malaysian standards while maki ng Malaysia's presence felt at the regional and 
international arenas of standardization.   
70. Malaysia is a member of the International Or ganization for Standardization, International 
Electrotechnical Commission, International Teleco mmunications Union, and Codex Alimentarius 
Commission.  Considerable progress has been made towards the alignment of Malaysian standards to 
international standards in line with its WTO obliga tions under the TBT Agreemen t.  Malaysia is also 
active in negotiating mutual recognition agreem ents with several APEC economies based on 
guidelines established by the governing international bodies.  
71. All Malaysian standards are voluntary unless referr ed to in specific technical regulations.  
Policies for establishing technical regulations are de termined by the relevant ministries and regulatory 
agencies.  Central Government (Federal) techni cal regulations are developed and enforced in 
accordance with objectives defined in Acts of Parlia ment;  3.2% (123 out of 3,793) of Malaysian 
standards are compulsory.  In addition, 94 foreign, international, and other standards are referenced in 
technical regulations and are thus compulsory.  Goods subject to technical regulations include 
transport equipment, electrical products a nd accessories, consumer safety products, and 
telecommunications equipment.  While most standa rds are voluntary, companies are encouraged to 
adopt them to ensure product competitiv eness and enhance market acceptance.  
                                                      
19 DSM (2004b).  Malaysia WT/TPR/S/156/Rev.1 
 Page 53 
 
 
(a) Development of standards 
72. Standards are developed by committees through consensus, with the collaboration of the 
private sector.  The national standards system cons ists of a national standards Committee, which is 
responsible for overall policy and oversight of the national system, and 20 sectoral committees, which 
in turn have established more than 200 technical committees.  Several private sector bodies have also 
been appointed as standards writing organizations for selected sectors, including the Cement and 
Concrete Association, Malaysian Plastics Manufact urers Association, the Electrical and Electronic 
Association of Malaysia, and the Malaysian Ca ble Manufacturers Association.  Beginning 2004, 
incentives such as partial sponsorship and tax deduc tion are offered to private sector companies 
participating in international standardization activities;  awareness programmes are also being 
conducted with specific industry associations.  
73. Some 51% of Malaysian standards are aligned w ith international standards (as of May 2005), 
up from 35% in 2001 (Table III.5).  This increase re flects international standards by the choice of 
Malaysian standard setting committees as the primar y option in revising standards and creating new 
ones.  About 80% of new standards adopted annually are aligned internationally.  Malaysia plans to 
gradually increase the percentage of standards al igned with international standards as they are 
reviewed.  Malaysia is actively involved in the development of international standards through bodies 
such as the International Organization for Standardi zation (ISO) and the International Electrotechnical 
Commission (IEC).  
Table III.5 
Malaysian standards aligned to in ternational standards, 2001 and 2005 
2001 2005 (to May) 
Aligned MS Aligned MS  Field  Cumulative 
Number of MS IDT MOD Cumulative 
Number of MS IDT MOD 
1 Food & Agriculture 417 88 1 478 81 3 
2 Chemicals 583 112 20 505 198 25 
3 Consumer Product & Safety 39 0 0 53 13 0 
4 Civil Engineering & Construction 185 6 1 217 23 4 
5 Electrotechnical  366 199 4 566 420 19 
6 Mechanical Engineering 127 9 1 198 79 3 
7 Information Technology 400 365 1 522 480 1 
8 Petroleum & Gas 100 26 1 136 49 2 
9 Halal  0 0 0 3 0 0 
10 Plastics 161 6 0 279 134 12 
11 Packaging 49 5 0 71 40 0 
12 Road Vehicles 43 15 1 86 18 7 
13 Fire Safety & Fire Protection 46 0 0 65 14 1 
14 Rubber 101 72 9 138 75 11 
15 Iron & Steel 9 9 0 73 29 8 
16 Textiles 0 0 0 197 0 0 
17 Medical Devices 0 0 0 0 0 0 
18 Occupational Health & Safety 17 0 0 77 72 0 
19 Quality Management & Quality 
Assurance 58 9 1 98 94 2 
20 Environment Management 14 0 0 19 15 0 
 Total 2,715 921 40 3,781 1,834 98 
 Percentage aligned 35.40% 51.10% 
Note: IDT – Identical;  MOD – Modified. 
Source: Data provided by the Depart ment of Standards Malaysia. WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 54 
 
 
74. The Government has endorsed the wider adopt ion of Malaysian standards as mandatory 
standards to protect the safety and health of cons umers and the environment.  The following products, 
inter alia,  are subject to mandatory technical regulations:  electrical products (Electricity Supply Act 
1990 and regulations under the Act);  fire safety pr oducts (Street, Drainage and Building Act, 1974, 
Uniform Building By-Laws);  automotive safety products (Road Transport Act 1972 and Regulations 
issued under the Act);  construction materials (Custom Prohibition Order);  telecommunication 
equipment (Multimedia and Multimedia Act 1998 a nd regulations made under the Act);  pipes 
(Petroleum Safety Measures Act and Transport of petroleum regulations 1985);  selected construction 
materials and components related to safety (S treet Drainage and Building Act 1974 – Uniform 
Building By-laws);  and machinery and components for safety (Factory and Machinery Act 1967 and 
regulations issued under the Act).  
(b) Conformity assessment  
75. The DSM is also the national accreditati on body with overall responsibility for the 
accreditation of organizations involved in conf ormity assessment.  These include testing and 
calibration laboratories, and organizations training personnel in conformity assessment.20  The DSM 
adheres to the relevant international guides/sta ndards for laboratory accreditation and for accreditation 
of certification bodies.  However, accreditation cr iteria and procedures must be approved by the 
Minister of Science, Technology and Innovation.  One of the main conformity assessment bodies is:  
SIRIM QAS International Sdn Bhd, which provides a comprehensive range of certification, inspection 
and testing services that conform to international standards and guidelines. 
76. The accreditation of laboratories is carried out  under the Laboratory Accreditation Scheme of 
Malaysia (SAMM), managed by DSM.  SAMM accred itation signifies the ability and competency of 
laboratories to carry out specific tests, measurement s or calibrations.  Fields of testing under the 
scheme cover chemical, biological, electrical, thermal, mechanical, and testing concerning calibration comprise temperature measurement, electrical, ma ss and related qualities, optical and photometric, 
dimensional and acoustic vibration measurements.  At the end of 2003, a total of 208 laboratories had 
been accredited, based on the interna tional standard ISO/IEC 17025:1999.  
(c) Halal certification 
77. Malaysia has played a leading role in the de velopment of halal certification, reflecting the 
Government's objective of developing the count ry as a hub for halal food products.  All meat, 
processed meat products, poultry, eggs, and egg pr oducts must receive halal certification from the 
Department of Islamic Development Malaysia (J AKIM).  Malaysian standards in this area were 
further strengthened in July 2004 through new guidelines issued by the DSM (first revision of MS 1500:2004).  It involves adopting procedures for slaughtering, processing, and other related operations as prescribed by Islamic rules.  It certif ies raw materials, ingredients, and products based 
on quality, sanitary, and safety considerations.  Ea ch individual product, rather than the production 
plant, must receive halal certification.  The certif icate is issued on the joint recommendation of the 
Malaysian Department of Veterinary Services and JAKIM following an on-site inspection.  The UN's 
Codex Alimentarius Commission has cited Malaysia as the best global example for halal food.  In 
addition to meeting halal requirements, food pro ducers are encouraged to adopt and maintain 
                                                     
 
20 The DSM accredited certification bodies are:  SIRIM QAS International Sdn. Bhd, Moody 
International Certification (Malaysia) Sdn. Bhd, CI Cer tification Malaysia Sdn. Bhd,  SGS (Malaysia) Sdn. Bhd, 
RWTÜV (Malaysia) Sdn. Bhd, Lloyd's Register of Shipping (M) Bhd, and Independent European Certification 
(M) Sdn. Bhd for quality management;  Moody Interna tional Certification (Malaysia) Sdn. Bhd, SIRIM QAS 
International Sdn. Bhd, SGS (Malaysia) Sdn. Bhd, and Independent European Certification (M) Sdn. Bhd for environmental management;  and SIRIM QAS Inte rnational Sdn. Bhd for product certification. Malaysia WT/TPR/S/156/Rev.1 
 Page 55 
 
 
standards that meet global benchmarks such as IS O 9000, Codex Alimentarius, the Quality Assurance 
Programme, Hazard Analysis and Critical Control Point (HACCP), Good Hygienic Practice (GHP), 
and Sanitation Standard Operating procedures (SOPs).  
(d) Overview of international agreements and arrangements 
78. Malaysia is a signatory to regional and in ternational mutual recognition arrangements 
(MRAs) for conformity assessment re sults.  By means of MRAs, products  that are tested and certified 
before export can enter the importing country direct ly without having to undergo similar conformity 
assessment procedures in the importing country.  Foreign conformity assessment bodies are permitted to operate in Malaysia in accordance with national la ws.  Malaysia is a signatory to a number of such 
arrangements.
21  Malaysia has also entered into an  MRA with Singapore, within the ASEAN 
Telecommunications Regulator's C ouncil grouping.  Currently, there are two phases to the MRA;  the 
first phase involves acceptance of testing results and the second acceptance of certification.  
(ii) Sanitary and phytosanitary regulations 
79. The WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS 
Agreement) recognizes the international standards, guidelines and recommendations, inter alia, of the 
World Organisation for Animal Health (OIE), the International Plant Protection Convention (IPPC), 
and the Codex Alimentarius Commission.  As a me mber and active participant in these and various 
other international organizations, Malaysia ma intains SPS measures in compliance with those 
international standards.  Malaysia has established three SPS enquiry points:  the Strategic Planning 
and International Division of the Ministry of Ag riculture and Agro-based Industry, responsible for 
matters relating to plants, livestock, and fisheries (and Malaysia's sole national notification authority 
for SPS regulations adopted or proposed);  the Fo od Quality Control Division of the Ministry of 
Health, responsible for food safety matters;  and the Department of Veterinary Services, enquiry point 
for matters relating to animal and animal products.  
80. Malaysia applies sanitary and phytosanitary ( SPS) measures to trade in plants, forest 
products, food, and animal and seaf ood products.  Malaysia's policy for sanitary and phytosanitary 
measures remain essentially un changed since 2001.  The regulatory framework under which SPS 
measures are implemented include the Plant Quar antine Act 1976 and the Rules of Plant Quarantine 
1981, based on the Codex Alimentarius Commi ssion and the International Plant Protection 
Convention (IPPC), aimed at protecting Malaysia's  agriculture from foreign plant diseases and pests 
and ensuring that Malaysian plant product exports  are free from infection.  The Animal Ordinance 
1953 aims primarily to prevent animal diseases a nd pests from infecting Malaysian livestock;  it 
regulates activities with regard to control and eradication of disease, animal conservation and welfare, 
export/import control and enforcement.  The Fisher ies Act 1953 covers the distribution and marketing 
of live fish and related organisms, and the Food Act 1983 and Food Regulations 1985 cover the 
preparation, sale, and use of food.  
81. Under Malaysian food standard s and regulations domestic a nd imported food products must 
be processed, stored and handled in a sanitary ma nner.  The authorities have worked to harmonize 
food standards with those applied internationally;  Malaysia has contributed to the development of 
Codex standards for certain products  such as palm oil and anchovies.   There are nutritional labelling 
requirements for certain food products, including cereal s, breads, milk, various canned foods and fruit 
juices, soft drinks, and salad dressings.  
                                                      
21 Pacific Accreditation Cooperation – Multilateral Agreement for quality systems;  International 
Accreditation Forum – Multilateral Agreement for quality systems;  Asia Pacific Laboratory Accreditation 
Cooperation – Mutual Recognition Agreement for testing and calibration;  and the International Laboratory Accreditation Cooperation – Mutual Recogniti on Agreement for testing and calibration. WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 56 
 
 
82. Malaysia implements SPS measures in conf ormity with SPS standards endorsed by the 
relevant international organizations for plant a nd animal health.  Betw een 2001 and 2004 there were 
56 cases where Malaysia, in accordance with OIE guid elines, restricted imports of livestock products 
due to diseases reported in the respective exporting countries (Table III.6). 
83. In order to meet SPS requirements in importi ng countries, Malaysia has also implemented 
accreditation schemes for the crop, livestock, and fisheries sectors.  These include the Farm 
Accreditation Scheme of Malaysia (SALM)22, Livestock Farms Certification Scheme (SALT), and 
Malaysian Aquafarm Certification Scheme (SPLAM).  The schemes are aimed at encouraging the practice of good farm, husbandry, and aquaculture practice.  
Table III.6 
Import restrictions on agricultural products, 2001-04 
Year Countries affected Diseases Products affected 
2001 Argentina, EU, Switzerland, United Kingdom, 
Thailand, France, China, Hong Kong, China, Japan, 
Netherlands Avian influenza, FMD, BSE Cloven footed, cattle, poultry, 
processed animal protein 
2002 India, China, Hong Kong, Argentina, Viet Nam Avian influenza, FMD, failure 
to meet certification 
requirements (India only) Offal, poultry, cattle, frozen 
beef, suckling pigs 
2003 Denmark, United States, Netherlands, Belgium, 
Canada, China, Germany, Thailand, Indonesia, 
Korea FMD, Newcastle disease, 
salmonella, BSE, HPAI Ruminant, poultry, birds, day 
old chicks, cattle, beef, offal 
2004 Thailand, Indonesia, Japan, Chinese Taipei, 
Viet Nam, Pakistan, China, Cambodia, Hong Kong, 
China, Lao PDR, United States, Canada, South Africa, Korea HPAI, Avian influenza Poultry, frozen beef 
Source:  Malaysian authorities. 
Nutritional labelling 
84. Malaysia requires labelling with nutritional in formation on certain processed, packaged food 
products sold in Malaysia.  The products include  cereals, breads, milk, canned meat, canned fish, 
canned fruit and vegetables, fruit juices, soft drinks, and salad dressings.  Nutrition labelling 
regulations issued in March 2003 outline the type a nd format of the nutritional information required.  
The regulations limit the kinds of nutritional claims, such as "reduced sodium", "low cholesterol", or 
"high fibre", that can appear on food packagin g.  Enforcement of the regulation began on 
1 March 2004.   
85. Research on genetically modified organisms (G MOs) is currently conduc ted on a small scale, 
mainly in government-funded research institutions and universities.  Malaysia has established a 
Genetic Modification Advisory Committee (GMAC), under the Ministry of Science, Technology and 
the Environment.  The role of the GMAC will include identification and safety management of risks 
associated with the use of GMOs and related products;  it has drafted a guideline for the release of 
GMOs into the environment.  The proposed polic y will cover safety issues in agriculture, public 
health, the environment, and transboundary issues pertaining to the release of GMOs and products 
containing or consisting of GMOs.23   
                                                      
22 The name was recently changed to Farm Certif ication Scheme for Good Agricultural Practices 
Malaysia. 
23 A regulation on the labelling of genetically modified food has been drafted by the Ministry of Health, 
Malaysia based on the draft Codex standard for genetica lly modified food:  it will give consumers an informed Malaysia WT/TPR/S/156/Rev.1 
 Page 57 
 
 
(iii) Taxation and tax incentives 
86. Malaysia remains relatively low-taxed, with to tal taxes amounting to 16.1% of GDP in 2004.  
Over two thirds of total tax reve nue are derived from direct taxes almost half of which involve 
corporate income tax (Table III.7).  Top marginal  tax rates for corporate and individual taxpayers 
were lowered by two percentage points to 28%  between 1998 and 2002 to support private sector 
activity in the wake of the Asian crisis.  In a ddition there have been important changes in tax 
administration such as the introduction of self assess ment for corporations in 2001 and the switch in 
2000 of the assessment year for corporate and indivi dual incomes from a preceding- to current-year 
basis.  Revenue from petroleum income tax is one of  the major contributors to direct taxes, accounting 
for 15.9% of total tax revenue in 2004;  Import tariffs accounted for 5.4% of the total. 
Table III.7 
Structure of direct and indirect tax revenue, 2001-04 
(RM million and per cent)  
 2001 2002 2003 2004 
Total (RM million) 61,492  66,860  64,891  72,051  
 (Per cent) 
Direct taxes 68.5 66.3 66.3 67.6 
Companies income tax 33.8 36.9 37.0 33.8 
Petroleum income tax 16.0 11.4 13.0 15.9 
Individual income taxa 15.3 14.8 12.3 12.5 
Stamp duties 2.7 2.6 3.1 3.3 
Othersb 0.6 0.7 0.9 2.1 
Indirect taxes 31.5 33.7 33.7 32.4 
Export duties 1.4 1.2 1.8 2.2 
Import duties 5.2 5.5 6.0 5.4 
Excise duties 6.7 7.1 7.8 8.9 
Sales taxc 12.0 13.8 12.3 9.5 
Service tax 3.1 3.3 3.1 3.3 
Othersd 3.1 2.7 2.7 3.2 
a Includes collection of income taxes without codes, which will be eventually classified to respective categories. 
b Includes real property gains tax and other income tax. 
c As of 1 January 2000, includes sales ta x on petroleum and its products to replace import and excise duties on these products.  
d Include betting, sweepstakes, and gaming ta x and revenue collection without codes, wh ich might be reclassified to respective 
duties. 
Note: Data for 2004 are preliminary. 
Source : Central Bank of Malaysia, Monthly Statistical Bulletin, February  2005.  
87. Indirect taxes account for around 5.2% of GDP.  The upward revision of excise duties on 
motor vehicles in 2004, which compensated for the lo wer import tariffs in line with the (impending) 
full implementation of AFTA, contributed to high er excise duty receipts.  The downward trend in 
import duties is consonant with gradual internatio nal trade liberalization and AFTA obligations.  
Import duties on selected goods have been reduced or  abolished in successive annual budgets;  export 
duties, on the other hand, have been increasing, ma inly from export duties on petroleum due to better 
crude prices.   
88. A general sales tax applies at 5-15% to local products and imports (except those to be re-
exported).  The 5% rate applies to certain foods , building materials and timber and the 15% rate 
                                                                                                                                                                     
choice for GMF.  The proposed regulation requires a label to indicate that a package contains genetically 
modified food or ingredients if the GM content is more than 3% of the total. WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 58 
 
 
applies to beer, wine, liquor, and cigarettes.  The 10 % rate is charged on all other types of goods, but 
it is not applied to raw materials and machinery used in export production.  The sales tax on paper 
was eliminated in the 2003 Budget.  Excise duties ar e applied to selected imported products that are 
also manufactured locally, such as colour tele visions, refrigerators, cigarettes, liquors, air 
conditioners, playing cards, mahjong tiles, petrol, dies el, and motor vehicles.  To encourage the export 
of locally manufactured goods, companies with li censed manufacturing Warehouse (LMW) status that 
manufacture goods subject to excise duty are exem pted from being licensed under the Excise Duty 
Act 1976. 
89. The indirect tax system has remained genera lly unchanged except for the introduction of 
higher tax rates for alcohol and tobacco in 2000 an d exemptions on hotel and restaurant services in 
2003 to revive the tourism industry after the SARS -related slowdown (Table III.8).  There have also 
been a number of selective measures in response to  changing business conditions such as adjustments 
to petrol and diesel taxes to counter fluctuations  in oil prices.  In the 2005 Budget the Government 
announced the introduction of a broad-based VAT -type goods and services tax (GST) in 2007 to 
replace the sales tax (levied on goods at the point of import or at the manufacturers' level) and the 
service tax (imposed on certain services).  This is an important step as the current sales tax is narrow-
based and its multiple rates make it difficult to admini ster effectively.  The G overnment notes that this 
will provide an opportunity to reduce cor porate and individual income tax rates.  
Table III.8 
Summary of Malaysian tax measures, 2005 
 Current system Key tax policy changes 
Direct taxes   
General corporations Tax rate of 28% applicable to resident 
and non-resident companies;  tax rate 
for SMEs with paid-up capital of RM 2.5 million and below is 20% for 
income up to RM 0.5 million 2004:  Taxation system review pane l to be set up to review the 
tax system including provisions of the Income Tax 1967 Act 
2003:  Introduction of lower tax rate for SMEs of 20% for income up to RM 0.1 million, subsequently raised to 
RM 0.5 million;  introduction of tax incentives, in particular 
for SMEs and FIEs through extension of pioneer status and increased exemptions;  exemption of property gains tax for 
one year from 1 June 2003 
2001:  Introduction of self-assessment 2000:  Switch of assessment year from preceding-year to 
current-year basis 
1998:  Tax rate lowered from 30% to 28%;  introduction of surcharges on repatriation of profits and principals (gradually 
phased out in subsequent years) 
Oil production companies Tax rate:  38% 1998:   Tax rate lowered from 40% to 38% 
Individuals Top marginal income tax rate:  28%;   
Non-residents subject to flat rate of 28% 2002:  Top marginal tax rate reduced from 29% to 28% and 
income brackets broadened (highest threshold increased from 
RM 0.15 million to RM 0.25 million) 
2001:  Top marginal tax rate reduced from 30% to 29% and income brackets broadened 2000:  Switch of assessment year from preceding-year to 
current-year basis 
1998:  Introduction of surcharges on repatriation of profits and principals (gradually phased out in subsequent years) 
Indirect taxes   
Sales General rate:  10%; 
Foodstuffs and building materials:  5%; Tobacco products:  25%; 
Alcoholic beverages:  20%; 
Petrol:  RM 0.5862 per litre; Diesel:  RM 0.1964 per litre 2004:  New goods and services ta x (GST) to be implemented 
effective 1 January 2007 – Government says it will effect greater tax compliance by tax payers 
2000:  Introduction of 20% and 25% tax rates for alcoholic 
beverages and tobacco products  respectively, effective 
27 October 2000, in lieu of a uniform rate of 15% 
Services General tax rate:  5% 2003:  Exemp tion for hotels and restaurants between 1 June 
and 31 December 2003 
  Table III.8 (cont'd) Malaysia WT/TPR/S/156/Rev.1 
 Page 59 
 
 
 Current system Key tax policy changes 
Selective excises   
Motor vehicles Depending on engine capacity 2004:  In troduction of car excise of 60% (for imported and 
domestic cars)  
Beverages and tobacco Cigarettes:  RM 58 per kg.;   
Beverages below 5.8% alcohol:  
RM 47.50 per decalitre;   
Other beverages:  RM 48.80 per decalitre 2004:  Excise duty to be raised to RM 81 per 100 sticks; 
beer to cost more;  excise duty un liquor to increased to 
between 10 sen and RM 28 per lit re from 5 sen and RM 23.40 
Import duties Ad valorem  rates vary from nil to 200% 
for CBU motorcars;  under ASEAN 
CEPT import duty for most items 0-
20% 2004:  Import duty reduced on 188 goods and abolished on 
27 goods to encourage the manufacture of finished goods 
domestically 
Import duty on selected raw materials for apparel and 
herbicides reduced to 5% and 30% from 10% and 35% 
2004:  minimum import duty for cars lowered from 140% to 
80% 
Export duties 10% ad valorem  for crude oil;  0-30% 
on palm oil (depending on price per tonne)  
Source:  WTO Secretariat analysis. 
90. According to the Malaysian authorities, the corpor ate tax rate is comparatively lower than that 
of other nations in ASEAN, Asia, and most deve loped countries, with the exception of Hong Kong, 
China;  Singapore;  Chinese Taipei;  Ireland;  a nd Germany.  Since Malaysia does not impose tax on 
dividend income, the corporate tax rate of 28% co mpares favourably with other nations.  In addition, 
Malaysia has comprehensive tax incentives schem es such as Pioneer Status, Investment tax 
Allowance, Reinvestment Allowance, and speci al incentive packages for targeted activities in 
manufacturing, agriculture and services.  This en sures that corporations undertaking eligible 
investments can pay significantly less than the full rate.  
Tax incentives 
91. As noted in Malaysia's previous Review, the tax system is an important instrument of 
Malaysia's economic development strategy.  A wide  range of investment incentives continue to be 
delivered through the tax system to promote resource-based industries;  high-tech industries;  new and emerging technologies;  strategic industries;  sk ills and human resource development;  manufacturing-
related industries like R&D, integrated logistics;   regional establishments;  and IT industries. 
92. Tax incentives are provided for in a number of laws, including the Promotion of Investments 
Act, 1986;  Income Tax Act, 1967;  Customs Act, 1967;  Sales Tax Act, 1972;  Excise Act, 1976;  and 
Free Zones Act, 1990.  These Acts cover investme nts in manufacturing, agriculture, tourism and 
approved services sectors, as well as R&D, training, and environmental protection activities.  Direct 
tax incentives grant partial or total relief from inco me tax for a specified period while indirect tax 
incentives come in the form of exemptions from im port duty, sales tax, and excise duty (Tables III.9 
and III.10 summarize the direct and indirect tax in centives by sector and activity and recent changes 
that have occurred in the review period).   
93. No estimates were available concerning total ta x revenue forgone as a r esult of tax incentives, 
although previous studies estimated a total e quivalent to 1.7% of GDP in the 1980s.
24  Nor was any 
information available on the cost-effectiveness of ta x incentives in attaining their stated objectives.  
                                                      
24 The Reinvestment Allowance alone cost the Government RM 1 billion annually in forgone tax 
revenues (WTO, 1998), p. 70. WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 60 
 
 
Experience in other countries suggests that  tax incentives are sel dom cost-effective.25  They run the 
risk of subsidizing good investments, which need no such assistance and would have been undertaken 
anyway, or turning bad investments into profitable on es.  To the extent that they have stimulated 
investment in the latter, tax incentives may well ha ve unduly distorted the allocation of resources and 
thereby contributed to the deterioration in capita l productivity recently experienced by Malaysia.  
Even in instances where the market may fail to fi nance good investments, as may be the case of R&D, 
for example, it is unclear whether tax incentives can effectively address such "market failure".  
Publication of estimates of tax revenues forgone along the lines of practices in many other OECD countries as well as studies evaluating their cost -effectiveness would greatly enhance fiscal 
transparency in Malaysia and contribute to more ef fective tax policy.  Elimination of those incentives 
that are found to be ineffective would permit a broadening of the tax base, which could be 
accompanied by reductions in statutory tax rates w ithout necessarily involving any loss in total tax 
revenues;  the outcome would be a more market-oriented tax system, aimed at encouraging investment in a more neutral fashion.  The Mala ysian authorities have established a Taxation System 
Review Panel, comprising members of the public and private sectors, to evaluate the tax system, 
including tax incentives.  According to the authorities, at the requ est of the Government, the World 
Bank prepared a report on the "effectiveness and imp act of tax incentives in Malaysia";  this report 
was not made available to the Secretariat. 
Table III.9 
Direct and indirect tax incentives in Malaysia by sector and activity 
Incentive Manufacturing Agriculture Approved 
services 
projects Tourism R&D Training 
activity Environmental 
protection 
activity 
1. Pioneer Status X X  X X  Xo 
2. Investment Tax Allowance X X X X X X Xo 
3. Industrial Adjustment 
Allowance X       
4. Infrastructure Allowance X X X X    
5. Double deduction on 
expenses Xa Xc Xe Xg Xj Xl  
6. Single deduction on 
expenses Xb Xd Xf Xh  Xm  
7. Tax exemption on value of 
increased exports X X      
8. Accelerated Capital 
Allowance X X   X  Xp 
9. Reinvestment Allowance X X     Xq 
10. Industrial Building 
Allowance X X X X  X  
11. Deduction for:  acquiring 
property rights;  acquiring a foreign-owned company;  developing websites X       
12. Import duty and sales tax 
exemption on raw materials or components X X   Xk Xn Xr 
13. Import duty and sales tax 
exemption on machinery 
or equipment X X X X    
14. Duty drawback X X    X  
15. Deduction for capital 
expenditure on approved agricultural projects  X      
     Table III.9 (cont'd) 
                                                      
25 Most econometric studies seem to show that forgone tax revenue s exceed the increase in desired 
investment.  In the case of Malaysia, see for example, Draisami and Rasiah (2001) .  They suggest the while 
incentives may have fostered  export-oriented FDI and created employme nt, some incentives are likely to have 
been overly generous or even redundant.  See also WTO (2001), Chapter III(4)(ii)(c). Malaysia WT/TPR/S/156/Rev.1 
 Page 61 
 
 
Incentive Manufacturing Agriculture Approved 
services 
projects Tourism R&D Training 
activity Environmental 
protection 
activity 
16. Additional incentives for 
food production and deep 
sea fishing  X      
17. Accelerated Agriculture 
Allowance on planting of 
rubber wood trees  X      
18. Income tax exemption   X Xi    
 
a For promotion of exports;  R&D;  training;  freight charges;  insurance premium;  overseas promotion;  and promotion of local  
brand names. 
b For pre-operating expenses on approved investment overseas;  pre-operating training expenses;  contribution in cash to techni cal 
or vocational training institutes;  donation to approved organization for the promoti on and conservation of environment;  gifts  
under Section 44 (6A) and 34 (6);  providi ng practical training to non-employees;  managing and operating RosettaNet Malaysia;  
promotion of export;  and drafting corporate knowledge-based masterplan. 
c For promotion of exports;  R&D;  and insurance premium. d For pre-operating expenses on approved investment overseas ;  donation to approved organization for the promotion and 
conservation of environment;  and gift s under Section 44 (6A) and 34 (6). 
e For promotion of exports of services;  R&D;  and training. f For pre-operating expenses on approved investment  overseas;  and pre-operating training expenses. 
g For promotion of exports;  and training. 
h For pre-operating expenses on approved investment  overseas;  and pre-operating training expenses. 
i For tour-operators;  organizer of international conference or  trade exhibition;  cars and motorcycle racing;  repair and 
maintenance of luxury boat and yacht in Langkaw i;  and chartering services of luxury yacht. 
j For non-capital expenditure incurred on R&D;  a nd expenses Payment for the use of services. 
k Import duty and sales tax exemption on materials, samples and equipment. 
l Double deduction on expe nses for training. 
m Single deduction on expenses for:  pre-ope rating training expenses;  contribution in cash to technical or vocational training  
institutes;  and providing practi cal training to non-employees. 
n Import duty and sales tax exemption on materials, samples and equipment. 
o Pioneer Status or Investment Tax Allowance for carrying out prom oted activity such as:  forest plantation;  recycling of prod ucts;  
storage, treatment and disposal of danger ous toxic and hazardous waste;  energy cons ervation;  and utilizing biomass as a new 
source of energy. 
p Accelerated Capital Allowance for environmental protection equipment. 
q Reinvestment Allowance for moderniz ing chicken and duck rearing system. 
r Import duty and sales tax exemption on machiner y and equipment;  and on catalytic converters. 
 
Source:  Ministry of Finance. 
Table III.10 
Main direct tax incentives for investment and recent changes 
Type of incentive Description of incentive 
Pioneer status (PS) Different degrees of exemption depending on the types of promoted  products or activities;  full exemption o f 
income tax (100% of the statutory income for five years) for companies producing high-technology products 
or associated activities;  income tax exemption on 85%  of statutory income for five years for companies 
producing products or  conducting activities in areas currently being promoted.  
2004:  PS with tax exemption of 100% (previously  85%) on statutory income for five years. 
2003:  A PS company intending to reinvestment before e xpiry of its PS will be eligible for RA on condition 
that the pioneer certificate is surrendered. 
Companies investing in knowledge intensive activities ar e granted "Strategic knowle dge–based status", i.e. 
eligibility for PS with tax exemption of 100%  of statutory income for five years. 
Investment tax 
allowance (ITA) Alternative to PS, designed for projects with large cap ital investment and long ge station periods involves a 
tax credit that can be offset against taxes paid on 70% of statutory income;  any unutilized part of the 
allowance can be carried forward to subsequent years un til the whole amount is used up.  The ITA is usually 
60% of qualifying capital expenditure incurred within a five-year period. 
2004:  ITA of 100% (previously 80%) on qualifying capital e xpenditure incurred for five  years, to be utilized 
against 100% (previously 85%) of statutory income. 
2003:  Companies which invest in knowledge intens ive activities granted:  "Strategic knowledge–based 
Status" whereby the company is eligible for ITA of 60% on the qualifying capital expenditure incurred 
within a period of five years.  The allowance can be of fset against 100% of the statutory income in year of 
assessment. 
Table III.10 (cont'd) WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 62 
 
 
Type of incentive Description of incentive 
Reinvestment allowance 
(RA) Like the ITA, this is a tax credit amounting to 60% of qualifying capital expenditu re that can be offset 
against taxes paid on 70% (100% in  designated regions) of statutory income.  Granted to manufacturing 
companies that have been operating for at least 1 year and incur qualifying capital expenditure for the 
expansion, upgrading, modernizati on or automation of production capacity and diversification into related 
products.   
2002:  To encourage companies to reinvest.  RA incentives extended from 5 to 15 consecutive years 
commencing from the year the first reinvestment is made. 
Industrial adjustment 
allowance (IAA) Available to companies in selected manufacturing s ectors, namely wood-based textiles, machinery and 
engineering, stamping, molding, t ools and dies, and the machinery sub- sector.  Approved companies granted 
an allowance of 60% to 100% based on the industrial activities undertaken.  The al lowance can be used to 
offset up to 100% of adjusted inco me in the year of assessment.  
Infrastructure allowance 
(IA) Available to any resident company in Malaysia engage d in manufacturing, agricultu re, hospitality, tourism or 
other industrial/commercial activity in  Sabah, Sarawak and the designated eastern corridor of peninsular 
Malaysia.  Companies are granted an allowance of 100% of capital expenditure or infrastructure.  The 
allowance can be utilized to offset up to 85% of  statutory income in the year of assessment. 
Export incentives:   
Double deductions  Allowed for the following expenses related to exports: e xpenses related to the promotion of exports, freight 
charges for rattan and wood products (only for manufactur ers in Sabah and Sarawak), export credit insurance 
premiums, and the promotion of Malaysian brand names. 
Exemption for the value 
of increased exports  Companies' statutory income equivalent to 10% and 15%  of the value of increased exports is exempt from 
tax provided the goods exported attain at l east 30% and 50% value-added, respectively. 
Industrial building 
allowance  An allowance of 10% of qualifying expenditure is gran ted in respect of buildings used as warehouses for 
storing goods for export and re-export. 
Incentive for operational headquarters (OHQs) Companies granted OHQ status are subject to a conce ssionary tax rate of 10% on income from qualifying 
services for a period of 5 years (which may be extended for another five years). 
2004:  Qualifying services provided by an OHQ to its related companies in Mala ysia given tax exemption 
provided such income does not exceed 20% of the OHQ income from qualifying services. 
2003:  Incentives for OHQs enhanced;  OHQs exempted from income tax for ten years and the dividends 
paid from the exempt income is exem pted in the hands of shareholders. 
Exemption for shipping 
operations Shipping company income derived or deemed to be derived from the operations of Malaysian ships is 
exempt from tax. 
Source:  MIDA, Malaysian authorities.  
(iv) Legal framework for business 
94. Since Malaysia's previous Trade Policy Review, the Companies Commission of Malaysia 
(CCM) was established as a result of a merger be tween the Registrar of Companies (ROC) and the 
Registrar of Business (ROB).  It came into ope ration in April 2002 under the Companies Commission 
of Malaysia Act 2001.  The CCM has the statutory power to act as an agency of the Ministry of 
Domestic Trade and Consumer Affairs to register, incorporate, and strike off companies and 
businesses in Malaysia.  Its main functions include the administration and enforcement of relevant 
Acts (including the Companies Act 1965 and the Registration of Businesses Act 1956), the registration of companies and businesses, the role of custodian of corporate statutory records and the 
inculcation of ethical conduct among company officers.  The CCM is also a supervisory body.  In December 2003 the CCM established the Corporate Law Reform Committee (CLRC) to review core 
company law governing the creation, existence, a nd termination of companies with a view to 
recommending legal reform or amendment to the Companies Act 1965. 
95. There is no significant change since 2001 (in the Companies Act 1965) in the registration 
requirements for companies, domestic and foreign,  seeking to establish in Malaysia.  Companies 
wishing to operate in Malaysia must register with the CCM's Companies Division.  All sole 
proprietorships and partnerships  must be registered with the CCM under the Registration of 
Businesses Act 1956.  To incorporate a company th e CCM must confirm whether the proposed name 
of the intended company is available.  Forei gn companies must incorporate a local company or 
register a branch in Malaysia in order to conduc t business.  Although encouraged by the Government, 
pure licensing is infrequent in Malaysia. Malaysia WT/TPR/S/156/Rev.1 
 Page 63 
 
 
(v) Government-linked companies (GLCs) 
96. Government-linked companies continue to pl ay an important role in the economy of 
Malaysia.  There are around 40 GLCs listed at the Bu rsa Malaysia (formerly the Kuala Lumpur Stock 
Exchange), representing one third of market capitaliza tion and a total market value of more than half 
of the country's GDP.  They operate in several secto rs;  some of the biggest are in infrastructure, 
including Telekom Malaysia, Tenega  (the national electric company), Malaysia Airline System and  
Malaysia Airport Holdings as well as Proton (the ca r company).  The Government exercises control 
over major decisions in GLCs directly or indirec tly, through federal agencies such the Employee 
Provident Fund (EPF), including appointment of boa rd members and senior management, company 
strategy as well as acquisitions and divestments.  While run on a commercial basis, some of the GLCs, especially the major ones such as Petronas, conduct functions of the federal Government, 
including the extension of welfare benefits and subsid ies.  In the oil and gas and energy sectors, the 
Government retains a majority ownership of Pe tronas and Tenega, and operates through them to 
provide petroleum products and power at subsidiz ed prices.  The large surpluses of Petronas has 
allowed the Government to extend a general form of social welfare without creating pressures on the 
budget.  While Petronas has performed strongly, and is Malaysia's only member of the Global Fortune 
500, many GLCs have been inefficient in policy-ma king and management and have closed off private 
investment from some infrastructure and related sectors.  
97. Recent steps to reform these companies by the Government are part of a broader effort to 
improve the performance of GLCs
26, and separate their function as an owner/regulator, on the one 
hand, and provider of social services, on the othe r, which should also benefit the capital market 
through improved governance and stronger financial results. 
98. In 2004, the GLCs were put under the oversi ght of the Government's investment arm, 
Khazanah, which will seek to turn them into market-driven entities.27  A full listing of Khazanah's 
holdings is contained in Table AIII.3.  Other re forms announced in mid-2004, which seek to enhance 
the efficiency of GLCs and to encourage privat e investment, include key performance indicators 
(KPI) and performance-linked compensation (PLC ) programmes, whereby management is made 
accountable for performance and is remunerated acco rdingly.  All GLCs will be required to fully 
adopt KPI and PLC programmes by the end of 2005.  The objectives of these reforms are to create an 
arms-length relationship between the federal Gove rnment and GLCs, make them more independent 
and commercially oriented, and encourage greater pr ivate investment in the GLCs.  Privatization, 
another strategy aimed at improving economic efficien cy, has slowed but the reform of the GLCs is 
perceived by the Asian Development Bank as an initial step in preparing some for divestment in the 
future.   
99. GLC reform is embedded in a strategy to rede fine the Government's role in the economy.  
GLC reform has been accompanied by measures to reduce conflicts arising from the Government's 
roles as regulator, provider of public goods, and share holder.  The Government's role as investor has 
been strengthened and separated from its other functi ons by shifting the shareholdings of more than 
30 GLCs to Khazanah.  Khazanah's management has been replaced and is subject to KPIs like the 
companies it holds.  A corporate governance comm ittee has been established to strengthen the 
enforcement of corporate governance laws.  It is headed by the Chairman of the Securities 
Commission and reports directly to the Prime Minister. 
                                                      
26 See for example NPC (2004), p. 8, which disc usses recent low productiv ity in public sector 
investment. 
27 Khazanah Nasional Berhad (2005). WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 64 
 
 
(vi) Corporate governance  
100. An efficient capital market capable of mobiliz ing domestic savings and channelling them into 
the most productive investments is essential for im proving Malaysia's competitiveness and long-term 
development.  Good corporate governance is essential for the establishment of such a market.  Since 
the last Trade Policy Review of Malaysia, th e authorities' commitment to improving corporate 
governance and performance has been given high priori ty in meeting Malaysia's development goals.  
Regulation concerning corporate governance and disclos ure has been strengthened to prevent a repeat 
of the damage wrought on Malaysia's financial reputation by corporate bailouts and failures. 
101. The Corporate Law Reform Committee (CL RC), was established by the Companies 
Commission of Malaysia in August 2003 to sp earhead the reform programme aimed at a 
comprehensive review of corporate law in Malaysia.28  Corporate governance reforms are high on the 
agenda of the CLRC as one of the four working groups focuses solely on issues of corporate 
governance and shareholder rights.  
102. In 1998, a High-Level Finance Committee wa s set up to develop a framework for the 
enhancement of corporate governance.  Its report,  published in March 1999, presents the Malaysian 
Code on Corporate Governance, which sets out the principles of best practices, recommends actions 
for strengthening the overall regulatory framework for listed companies, and indicates the need for 
training/education of corporate participants.  Im plementing the recommendati ons has taken the form 
of updating laws, regulations, and rules in line with international best practices;  amendments to the 
listing requirements of the Kuala Lumpur Stock Exchange (renamed the Bursa Malaysia);  and 
development of accreditation programmes for existing directors of listed companies.  KLSE's new listing requirements, launched in January 2001,  focus on enhancing corporate governance and 
transparency, improving efficiency in capital activities, strengthening investor protection, and 
promoting investor confidence. 
103. In February 2001, the Government published a ten-year Capital Market Master Plan 
(CMMP)
29 to establish an internationally competitive capital market, comprising the equity and bond 
markets.  The main objectives of the first founda tion-building phase were to strengthen corporate 
governance and surveillance, to develop a broad co rporate bond market, to make fundraising more 
efficient and reduce transaction costs, to unite the ex isting exchanges, and to boost the liquidity of the 
stock market.  The second phase of the CMMP started in 2004 and involves the demutualization of the stock exchange, liberalization of stockbroking a nd investment management, removal of structural 
impediments to market access, deregulation, e nhancing secondary market liquidity, and allowing 
greater international participation in the domestic capital market.  
104. Progress has also been achieved in enhanci ng corporate governance standards and the 
transparency regime with the coming into effect of  several legislative amendments in January 2004.  
These amendments were aimed at enhancing regul atory provisions on client asset protection, a 
framework on investment advice, civil and ad ministrative action, clearing and settlement 
arrangements, as well as whistle blowing.
30 
105. Efforts to improve corporate governance and recen t reforms in GLCs, should be seen in the 
broader context of the need in the corporate sector  to improve competitiveness.  In its bid to address 
the challenges of transitioning into a more innova tion and knowledge driven economy to move up the 
                                                      
28 Companies Commission of Malaysia (2003) and IMF (2002). 
29 Securities Commission (2001) and (2004). 
30 Legislative amendments included Securities Industry (Amendment) Act 2003, Securities 
Commission (Amendment) Act 2003, Futures Industry (Ame ndment) Act 2003, and Securities Industry (Central 
Depositories) (Amendment) Act 2003.  Malaysia WT/TPR/S/156/Rev.1 
 Page 65 
 
 
value-added ladder, Malaysia is  focusing on improving total factor productivity (TFP) growth, and 
thus international competitiveness, by strengthening the investment climate and enhancing corporate 
governance. 
(vii) Competition policy 
106. Malaysia does not have a comprehensive competition law, but recognizes that a competition 
policy is an essential part of modern policy infrast ructure.  The Eighth Malaysia Development Plan 
states that "... a fair trade policy and law will be formulated to prevent anti-competitive behaviour 
such as collusion, cartel price fixing, market  allocation and the ab use of market power..."31  In 2003, 
Malaysia notified the WTO that it is prepar ing a competition policy and fair trade law32;  the process 
is expected to be completed by the end of 2005.   Among the provisions under study are controls on 
the abuse of dominant market position, cartels and restrictive business practices, the establishment of 
an office of fair trade to conduct further research (in the medium term) and the Fair Trade Practices 
Commission to implement the Fair Tr ade Practices Act (in the long term). 
107. The Ministry of Domestic Trade and Cons umer Affairs (MDTCA) is responsible for 
formulating a competition policy for Malaysia.  Currently, the Ministry is preparing a draft policy.  
Besides research on various laws in  different countries, consultations are carried out with competition 
authorities, like the Japan Fair Trade Commission a nd the Indonesian Commission for the Supervision 
of Business Competition (KPPU) with the aim of fi nding the appropriate contents for Malaysia's 
competition policy.  The Ministry meanwhile has embarked on a competition advocacy programme since 2003 with the aim of consulting both public a nd private sector agencies on the policy needs.  
Further, in-depth discussions have been organized with both sectors to assist Ministry officials in 
refining the draft policy.  Several high level worki ng groups in the public sector have been formed to 
discuss the possible impact of the policy on existing industries within the economy. 
108. Although there is no national competition policy, Malaysia does have legislation to address 
competition issues in the communications and multimedia and energy sectors and in its consumer 
protection legislation.   
109. The Communications and Multimedia Act 1998 has provisions on general competition 
practices (Chapter II), which include the prohib ition of anti-competitive conduct, entering into 
collusive agreements, tying or linking arrangement s, and determination of dominant licensee.  In 
addition, a study was conducted in June 2003 by Malaysian Communications and Multimedia 
Commission (MCMC) to assess dominant position in  the communications market, and a Public 
Inquiry Paper was issued in August 2004 to obtain public feedback.
33 
110. The MCMC was created through the Communica tions and Multimedia Act 1998 to ensure 
competition in telecommunications.  It is responsib le for implementing the Act, which provides for 
anti-competitive prohibitions for the comm unications sector (Sections 133-144).34  Thus far, MCMC 
                                                      
31 Chapter 16, para. 32. 
32 WTO document WT/WGTCP/W/239, 24 July 2003. 
33 Malaysian Communications and Multimedia Commission (2000) and Malaysian Communications 
and Multimedia Commission online information.  Available at:  www.cmc.gov.my/Admin/FactsAndFigures/ 
PublicEnquiryReport. 
34 Chapter 2 of the Communications and Multimedia Act 1998 deals with General Competition 
Practices.  Section 133 - Prohibition on anti-competitive condu ct provides:  "A licensee shall not engage in any 
conduct, which has the purpose of substantially lessening competition in a communications market".  Section 
143 - Penalty for offence:  "A person who contravenes any prohibition under this Chapter commits an offence and shall, on conviction, be liable to a fine not ex ceeding RM 500,000 or to imprisonment for a term not WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 66 
 
 
has published two guidelines:  the Guideline on Substantial Lessening of Competition and the 
Guideline on Dominant Position in A Communication Ma rket.  The Government's master plan for the 
telecommunications industry provides guidelines for co mpetition, interconnection charges, tariff rates, 
and network development. 
111. The Energy Commission Act 2001 provides for the Energy Commission to "promote and 
safeguard competition and fair and efficient market conduct;  or, in the absence of a competitive market, to prevent the misuse of monopoly or market power in respect of the generation, production, 
transmission, distribution and supply of electri city and supply of gas through pipelines".  The 
Electricity Supply Act 1990 and the Energy Commission Act 2001 supervise the activities of 
electricity suppliers via licences.  The Commission has powers, among others, to regulate the service 
of providing electricity by th e licensee including the determination of performance standards and 
standards of facilities and services and their en forcement, and to promote competition in the 
generation and supply of electricity to, inter alia,  ensure optimum supply at reasonable prices. 
112. Under Section 37 of the 1990 Act, any licen see who supplies electricity or undertakes any 
electrical work outside the area of supply specified in his licence without express authority from the Commission is guilty of an offence and may be  liable to a fine not exceeding RM 500,000, and 
removal of the unauthorized line or work.  In add ition, a licensee who without lawful excuse fails to 
comply with any term or condition in the licence may be liable to a fine not exceeding RM 10,000 and 
to a further fine not exceeding RM 1,000 for ever y day during which the offence continues after 
conviction. 
113. The Consumer Protection Act 1999 contains elements  of competition policy.  It is designed to 
protect consumers, manufacturers, and traders from une thical advertising and unfair trade  practices.  
It prohibits false or misleading representation w ith respect to the sale of goods and services and 
established the Consumer Claims Tribunal for disp utes relating to violation of consumer rights 
referred to in the Act. 
(viii) Intellectual property 
114. Malaysia has been a member of World Intellectual Property Organization since 
1 January 1989, party to the Paris Convention 1883 since 1 January 1989, the Berne Convention 1886 
since 1 October 1990;  it signed the WTO TRIPS Agreement on 1 January 1995.  In 2000, the Malaysian parliament amended the Copyright Act, the Patents Act, and the Trade Marks Act as well 
as legislation on layout designs of integrated circui ts and geographical indica tions in order to bring 
Malaysia into compliance with its TRIPS obligat ions.  The Optical Discs Act 2000 established a 
licensing and regulatory framework to control the manufacture of copyrighted works and to fight 
piracy.  Malaysia does not provide data exclusivity  protection i.e. protection of the dossier submitted 
by pharmaceutical companies in support of drug re gistration.  However, undisclosed information in 
Malaysia is protected under the Official Secret s Act 1972.  Malaysia has not ratified the WIPO 
Copyright Treaty or Performance and Phonograms Treaty.  
115. According to the authorities, Malaysia will acced e to the Patent Cooperation Treaty (PCT) in 
2005.  Malaysia is also signatory to the A SEAN Framework Agreement on Intellectual Property 
Cooperation.  Malaysia, together with the other A SEAN countries, is working on the harmonization of 
the ASEAN Regional Trade Mark Filing System and the Industrial Design Filing System.  Malaysia 
cooperates, inter alia , with the World Intellectual Property Organization (WIPO), the European Patent 
Office (EPO), the Japanese Patent Office (JPO), the UK Patent Office, the Australian Industrial 
Property Office (AIPO), and othe r Intellectual Property Offices. 
                                                                                                                                                                    
 
exceeding five years or to both and shall also be liable to  a further fine of RM 1,000 for every day or part of a 
day during which the offence is continued after conviction". Malaysia WT/TPR/S/156/Rev.1 
 Page 67 
 
 
(a) Overview of IP laws and regulations 
116. Malaysia's intellectual property regime is designe d to protect patents, trade marks, industrial 
designs, copyright, geographical indi cations, and layout designs of inte grated circuits.  The principal 
agency responsible for policy development and admi nistration is the Intellectual Property Corporation 
of Malaysia, which when established in 2003, took  over the functions of the Intellectual Property 
Division of the Ministry of Domestic Trade and Consumer Affairs.  
Patents 
117. The Patents Act 1983 was amended and enfo rced on 1 August 2001.  The amendments 
include:  extending the protection term from 15 years from the grant of the patent to 20 years from the 
date of filing;  updating the provision on compul sory licences in compliance with Article 31 of the 
TRIPS Agreement;  permitting parallel import;  and allowing the Government to prohibit commercial 
exploitation of patent for reasons of public order or morality.  A fu rther amendment was made in 2003 
to include the provision for the Patent Cooperati on Treaty (PCT) and to allow importation under the 
scope of compulsory licensing.35  Protection of confidential test data is not provided for under current 
laws.36  Presently, pharmaceutical and agricultural chemi cal test data are protected under the Official 
Secrets Act 1972. 
Trade marks 
118. The Trade Marks Act 1976 and the Trade Marks Regulations 1977 govern trade mark 
protection in Malaysia.  Trade mark protection is not  limited in time provided registration is renewed 
and use continues.  Infringement actions can be take n against non-authorized users.  Amendments to 
the trade marks laws provide for the registrati on of service marks, protection of well-known trade 
marks, and enforcement of border measures.   
Copyright and related rights 
119. An amendment to the Copyrights Act 1987 in the year 2000 provides protection for 
performers with a view to complying with the TRIPS Agreement (as well as the WIPO Copyright 
Treaty and the WIPO Performances and Phonograms Treaty).  Section 41 of the Act covers the 
various offences related to IPR infringement and th eir penalties.  An amendment in 2003 included the 
power of arrest without warrant a nd the imposition of stiffer penalties.37  The Government also 
enacted the Optical Disc Act in September 2000 est ablishing a licensing and regulatory framework for 
manufacturing copyrighted work and controlling optical  media piracy.  The Optical Disc Act requires 
optical media manufacturers to obtain licences from th e Ministries of International Trade (MITI) and 
of Domestic Trade and Consumer Affairs (MDTCA).  They must also place identification codes (SID codes) on each disk, keep inventories of produc tion runs, shipments of finished products, and 
production orders received, and allow regular inspections of their operations. 
                                                     
 
35 No compulsory licence has been granted since 2001. 
36 Article 39.3 of the TRIPS Agreement obliges Memb ers, when requiring (as a condition of approving 
the marketing of pharmaceutical or agricultural chemical  products) the submission of undisclosed test or other 
data, to protect such data against unfair commercial use and disclosure. In the view of some of Malaysia's trading partners, Malaysia needs to protect confidential test data and pharmaceutical products by linking the 
marketing approval process to the patent registration process.   
37 The Copyright Act 1987 provides for a minimum fine of RM 2,000 to RM 20,000 for each infringing 
copy, and/or to imprisonment for a term not exceeding five years.  Under the Trade Descriptions Act 1972, 
individuals applying and supplying false trade description (i.e. counterfeit goods) is liable to a fine not 
exceeding RM 100,000 and/or imprisonment for a term not  exceeding three years.  A corporate body guilty of 
an offence under the Act is liable to  a fine not exceeding RM 250,000. WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 68 
 
 
Industrial Design 
120. Industrial designs protection is granted for five years from the date of filing, and is renewable 
for two consecutive terms of five years, under th e Industrial Designs Act 1996 and the Industrial 
Designs Regulations 1999, both of which entered into force on 1 September 1999.  Registration 
normally takes 8 to 12 months from the time of application.  The Act accords the owner of a 
registered design the right to institute legal pro ceedings against any person who has infringed or is 
infringing any of the rights conferred by registration. 
Layout design of integrated circuits 
121. The Layout Designs of Integrated Circuits Act 2000, which entered into force on 15 August 
2000, provides property rights for layout designs of in tegrated circuits without any registration.  
Protection is for ten years from the date of commer cial exploitation.  Protection lapses 15 years after 
the date of creation of a  layout design.  The right-holders can initiate civil action in the High Court for infringements.  The court determines any da mages, injunctions or other legal remedies. 
Geographical indications 
122. The Geographical Indications Act 2000, enforced on 15 August 2001, gives protection to 
goods such as wines and spirits, natural or agricultu ral product.  The Act provides protection to goods 
bearing the name of the place where the quality, reput ation or other characteristic of the goods is 
essentially attributable to their geographical origin. 
Trade Secrets 
123. The trade secrets are protected against unauthorized use and disclosure under common law.  
Confidential information includes industrial processes , business secrets, secret methods, and customer 
lists. 
(b) Intellectual property right infringement and enforcement issues 
124. Malaysia has made determined efforts to im prove the enforcement of intellectual property 
rights, but piracy remains a significant problem.  The intellectual property laws in Malaysia have 
made available statutory provisions for owners of  intellectual property to initiate actions against 
infringers and seek remedies.  Intellectual property ow ners are encouraged by the Government to take 
advantage of these provisions.  
Piracy 
125. The Malaysian Government has undertaken effo rts to curb infringement of intellectual 
property rights particularly in copyright and pr oduct counterfeiting (Box III.1).  These efforts include:  
operations by the MDCTA
38 Anti-Piracy Special Task Force, wh ich has inspected licensed factories 
and raided illegal ones, confiscating a large number of  pirated products;  the banning of sale of optical 
disc products in open spaces since August 2001;  setting up a forensic centre to identify the source of 
illegal production of CDs/VCDs;  provision of rewards for informers;  strengthening the legal 
provision  and amendments to the Copyright Act 1987  in 2003, which include power of arrest without 
warrant and imposing stiffer penalties;  implemen tation of affixing Original Labels, beginning 
15 January 2003, to differentiate between origin al and pirated products;  and cooperation with 
airport/port authorities as well as courier compani es in detecting exports of illegal CDs/VCDs. 
                                                      
38 Ministry of Domestic Trade and Consumer Affairs (2003). Malaysia WT/TPR/S/156/Rev.1 
 Page 69 
 
 
Box III.1:  Malaysia's enfo rcement activities to comb at optical disc piracy 
The Government has enacted the Optical Discs Act 200 0 and regulations, and provides monetary support 
for public awareness campaigns on IP.  Malaysia is drafting a National Intellectual Property Policy (NIPP) 
to harness intellectual property as the new m over for economic growth  and as economic tool.  
Intellectual property rights enforcement comprises cr iminal proceedings, civil actions, and administrative 
measures.  The enforcement of criminal sanctions has been entrusted to the Enfo rcement Division of the 
Ministry of Domestic Trade and Consumer Affairs (the Ministry).  The number of enforcement officers was 
increased by 525 in 2004 to a total of 1,541.  In orde r to combat piracy, the Mini stry cooperates with the 
Royal Malaysian Police, Ministry of International Trade and Industry, the Royal Customs and Excise 
Department, National Film Development Corporation Ma laysia (FINAS), local au thorities, and Chemistry 
Department.  A Special Anti-Piracy Task Force was established in 1999 to take aggressive and consistent action against stores or warehouses, shopping complexes and retail outlets to reduce piracy.  
In addition, forensic testing on op tical discs has been implemented to trace the source of piracy;  the 
issuance of manufacturing licences for optical discs has been stopped since March 2003;  acquisition or import of production machinery (excep t for replacement and upgrading) ha s been prohibited;  and producers 
of optical discs are required to submit monthly information reports on optical discs produced, production 
volumes, and use of raw materials. 
Currently there is no specialized IPR court in Malaysia;  infringement cases are instituted at the Malaysian 
Court.  The judges are given specialized training on  IPR to enhance their knowledge and sharpen their 
expertise.  The Copyright Tribunal, established unde r the Malaysian Copyright Act 1987, consists of a 
chairman, deputy chairman and up to 20 other members.  Its purpose is to balance the rights of the owner 
and the user of a copyright.  The Tribunal grants li cences to produce and publish a translation of a literary 
work written in any other languages, and arbitrat es disputes relating to use of copyright works.  
Public awareness programmes have been initiated,  and their allocation has been increased from 
RM 2 million to RM 4 million, including a media campaign on IP awareness;  publication of booklets and 
advertisements.  The Intellectual Property Corporation of Malaysia has also allocated RM 3.5 million for exhibitions, road shows, seminars and courses on IP awareness.  Malaysia has been implementing a reward 
scheme for information leading to confiscation of illegal production machines.  
The Intellectual Property Corporation of Malaysia c ooperates with the Malaysian Intellectual Property 
Association (MIPA), Licensing Executives Society of Malaysia (LESM), Malaysian Inventions and Designs 
Society (MINDS), Intellectual Property Alumni A ssociation of Malaysia (IPAAM), and the Small and 
Medium Sized Industry Association of Malaysia.  Th e Business Software Alliances (BSA) coordinated with 
the Ministry in awareness campaigns by running advertisements in major newspapers highlighting the 
consequences of using counterfeit products (illegal software).  
Malaysian Copyright Act 1987 :  upon the conviction of the offence, the offender is liable to a fine for each 
infringing copy or contrivance, or to imprisonment or to both.  Under the latest amendment of the Act, 
which came into force on 15 August 2003, the authoritie s are given expansion of powers to arrest without 
warrant any person whom they believes to have commit the offence under the Act or subsidiary legislation 
there under (Section 50A of the Copyright Act 1987).  
Malaysian Trade Descriptions Act 1972:  penalty for offences under the Act is a fine or an imprisonment or 
both for individual offenders and corporate offenders.  The fines and imprisonment are doubled for the 
second and subsequent offences.  G oods seized are liable for forfeiture. 
Malaysian Optical Discs Act 2000 (ODA):  passed by Parliament in July 2000 and is in force since 
15 September 2000.  The ODA specifically focus on licensing and monitoring the production of optical 
discs.  
Box III.1 (cont'd) WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 70 
 
 
 
All the enforcement officials receive  regular and extensive training loca lly and internationally relating to 
IPR including cooperation with the WCO regarding th e border-measures.  The Enforcement Division of the 
Ministry recruited more enforcement officers and focused on two steps to t ackle piracy and counterfeiting:  
such as to learn source information at the manufacturing level and to run domestic raids.  The Ministry 
established Inspection Task Forces to monitor and enforce laws including on-going inspection involving the 
licensed and unlicensed factories.  
Malaysia enters various treaty administered by WIPO and WTO and participates in the meetings, seminars 
and workshops relating to IPR.  In 2003 and early 2004, Malaysia jointly organized a seminar and workshop 
with WTO and WIPO regarding IPR.  
Source: APEC (2005), Report on the Enforcement Best Practice in APEC Economies to Combat Optical
Disc Piracy,  20th IP Experts' Group Meeting, Korea, February 2005.  
126. The International Intellectual Property Alliance (IIPA), which represents U.S. copyright-
based industries, estimates piracy levels in Mala ysia in 2004 at 50% for motion pictures, 52% for 
records and music, and over 90% for entertainment software (Table III.11);  total industry losses in 
Malaysia due to piracy are estimated at US$188 m illion.  The IIPA contends that there may be over 
40 optical disc production plants, licensed and unlicensed, which "massively overproduce", leading to significant exports of pirated materials.
39  The Malaysian authorities disagree with the basis of the 
IIPA's estimates and maintain that the Government's  efforts have met with considerable success in 
eradicating piracy in the country.  However, optical disc product piracy is still perceived by some to 
be a serious problem in Malaysia.40 
Table III.11 
Estimated trade losses due to copyright piracy, 2000-04 
(US$ million and per cent) 
2000 2001 2002 2003 2004 
Industry Loss Level 
(%) Loss Level 
(%) Loss Level 
(%) Loss Level 
(%) Loss Level 
(%) 
Motion pictures 41.0 80 40.0 80 42.0 75 38.0 50 36.0 50 
Records and music 15.6 65 148.9 70 110.2 70 40.0 45 55.5 52 
Business software 
applications 75.4 66 75.0 70 79.2 68 77.0 63 74.0 63 
Entertainment 
software .. 98 56.4 93 .. .. .. 90 12.9 91 
Books 8.0 .. 8.2 .. 8.3 .. 9.0 .. 10.0 .. 
Total 140.0 - 328.5 - 239.7 - 164.0 - 188.4 - 
.. Not available. 
Source:  International Intellectual Propert y Alliance (2005), 2005  Special 301 Report:  Malaysia, p. 359. 
127. It may be too early to judge the effectiveness of  enforcement of the laws to eradicate optical 
disc piracy.  There has been a significant rise in the number of cases being pursued (Table III.12), and 
in the value of fines imposed.  According to the En forcement Division of the MDCTA, this is partly 
due to the increase in the number of enforcement of ficers.  In addition, the Copyright Act 1987 was 
amended in October 2003 to include the imposition of a minimum fine of between RM 2,000 to 
                                                      
39 See IIPA (2005), p. 360. 
40 This is reflected in the placement of Malaysia  on the United States Special 301 Watch List since 
October 2001.  Under the Special 301 provisions of the US Trade Act of 1974, the US Trade Representative is 
required to monitor and identify countries that deny ad equate and effective protection of IPRs or fair or 
equitable market access for U.S. persons that rely on IPR.  Malaysia WT/TPR/S/156/Rev.1 
 Page 71 
 
 
RM 20,000 for each infringing copy;  the highest fine so far is reported to be RM 7.3 million.  The 
Special Task Force has overseen a more vigorous pr ogramme of raids on sellers of pirated products, 
and there has been some progress in  tackling the judicial backlog for infringement cases.  Courts have 
meted out quite severe criminal penalties, mostly  involving confiscation of DVDs and production 
equipment and fines.  The authorities recognize the importance of establishing specialized IP courts 
and assigning piracy cases to prosecutors and judges tr ained and experienced in copyright.  They are 
also making efforts to educate the general public about  the value of intellectual property rights to the 
businesses that own them.   
Table III.12 
Actions taken under the Copyright Act 1987, January 2001 to December 2004 
 2001 2002 2003 2004 
Film (optical discs)     
No. of cases 226 132 586 775 
Seizure value (RM '000) 4,188.1 1,053.3 9,782.3 12,440.4 
Cases resolved 18 7 9 75 
Value of fines (RM '000) 94.5 78.9 42.4 7,999.0 
Music     
No. of cases 122 28 88 110 
Seizure value (RM '000) 1,227.4 56.8 1,029.9 2,223.9 
Literature     
No. of cases 17 9 14 7 
Seizure value (RM '000) 812.9 227.9 40.1 576.0 
Art     
No. of cases 5 2 5 6 
Seizure value (RM '000) 27.3 97.0 20.8 103.9 
Computer     
No. of cases 19  11 21 60  
Seizure value (RM '000)  2,249.2 229.2 335.6 7,017.1 
Source: Enforcement Division, Ministry of Domestic  Trade and Consumer Affairs, Malaysia. 
Counterfeit goods 
128. Trade mark counterfeiting is reportedly rampant in  Malaysia due to insufficient enforcement;  
articles include apparel and luxury goods, printer cartridges, plastic container systems, motor oil, 
automobile spare parts, household cleaning agen ts, shampoo and skin care items, tobacco, mobile 
phone batteries, and toys.  Counterfeit pharmaceu tical products, including drugs with the wrong 
ingredients and those with fake packaging, are of particular concern.41  In order to curb product 
counterfeiting, an Anti-Counterfeit Task Force was established in March 2002.  The task force has 
helped to build a closer network among trade mark owners, government agencies, and the Ministry of 
Domestic Trade and Consumer Affairs.  Ac tions taken under the Trade Descriptions Act 197242 
against counterfeit products are detailed in Table III.13. 
                                                      
41 In 2003, the Ministry of Health announced to local industry groups its intention to require all 
medicines and health care products to be affixed with a hologram label as part of the Government's effort to 
combat rising counterfeiting in these goods.  The Ministry has made it ma ndatory for pharmaceuticals, over the 
counter medicines, and traditional products to be affixed with a hologram label since 1 May 2005 for non-parenterals and 1 July 2005 for parenterals/injectables. 
42 A Court of Appeals interpretation of the trade ma rk law requires enforcement officials to have a 
Trade Description Order to conduct criminal raids when the counterfeit product seized is not identical to the trademarked original;  in the view of some trad ing partners, this can complicate enforcement.   WT/TPR/S/156/Rev.1 Trade Policy Review 
Page 72 
 
 
Table III.13 
Seizure of counterfeit goods under Trade Descri ptions Act 1972, January 2001 to December 2004 
 2001 2002 2003 2004 
Number of cases 1,954 3,171 6,084 3,887 
Clothing 526 611 900 853 
Medicine 9 30 22 28 
Spare parts 10 12 25 35 
Watches 75 76 148 125 
Leather goods 115 150 310 295 
Cassettes/videos 87 28 103 51 
Optical discs 710 1,880 3,878 1,593 
Seizure value (RM)  10,767,739.4 19,341,891.8 23,711,020.5 78,162,987.2 
Clothing 1,076,933.7 587,349.3 4,554,606.3 2,268,088.4 
Medicine 24,779.8 186,392.0 330,673.6 13,271.0 
Spare parts 132,730.0 28,829.0 230,417.8 19,795,248.0 
Watches 76,321.0 269,117.0 373,427.3 718,590.1 
Leather goods 57,096.0 338,651.4 789,817.4 1,734,669.9 
Cassettes/videos 87,140.6 36,524.5 189,461.3 1,508,936.0 
Optical discs 1,840,445.4 13,299,508.0 7,547,963.3 8,973,819.0 
Source: Enforcement Division, Ministry of Domestic  Trade and Consumer Affairs, Malaysia.