WT/TPR/S/225/Rev.1 Trade Policy Review 
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IV. TRADE POLICIES BY SECTOR 
(1) INTRODUCTION  
1. During the period under review, Malaysia h as been adopting measures specified under 
various plans, such as the Ninth Malaysia Plan (2006-10) and the Third Industrial Master Plan (2006-20), with a view to guiding the country towards global competitiveness and becoming a higher-value added and knowledge-based economy.  Malaysia  aims to increase the share of the services 
sector to GDP to 60% by 2020, in an effort to  establish a knowledge-based economy less reliant on 
manufactured exports.   
2. Malaysia has a generally liberal trade regime  for agricultural products, with an average 
applied MFN tariff at 2.8% (WTO definition) in 2009, although some non- ad valorem  tariffs tend to 
conceal relatively high rates.  In addition, import licensing applies to some agricultural products, and 
rice may only be imported by BERNAS.  As a m onopsony buyer of rice, BERNAS has the market 
power to negotiate lower prices with its suppliers .  Malaysia began to apply tariff-rate quotas on 
agricultural products in 2008.  Import tariffs are ze ro for mineral resources and oil and gas, which are 
not subject to any import licensing requirements.  Export taxes, however, apply to some mineral products, and to crude oil and condensate. 
3. Malaysia's manufacturing sector is relatively open to trade and foreign investment;  the 
average tariff for manufacturing products was 8.7% in  2009, and 100% foreign equity participation is 
generally allowed.  However, a notable excepti on is the automotive sector, which has long been 
sheltered from foreign competition by both tariff and non-tariff measures.  Although the sector has 
been successful in taking a large share of the domestic market, its exports are modest, indicating a lack of external competitiveness.  In October 2009, following a review of Malaysia's National 
Automotive Policy, the MITI a nnounced liberalization measures;  the Government intends to 
encourage investment, promote exports, and enhan ce the competitiveness of Malaysia's cars in the 
global market.  Nonetheless, it seems the sector conti nues to be protected;  in particular, in response to 
an economic downturn after the global crisis, reba tes are given for buyers replacing vehicles over 
ten years old with national brands. 
4. The services sector has been the largest contri butor to GDP.  Compared with manufacturing 
(with the notable exception of automobiles), servi ces has been relatively closed to international 
competition, with FDI restrictions comprising the major obstacles.  However, the Government has 
recently been relaxing or removing foreign invest ment restrictions in services, although more 
measures are needed to promote competition.   
(2) A
GRICULTURE  
5. The development of agriculture is guided mainly  by the Ninth Malaysia Plan (9MP) and the 
Third National Agricultural Policy (1998-2010) (NAP3).  The main objective under the 9MP is to revitalize agriculture to be "the third pillar of  economic growth", via a New Agriculture Programme 
(2005-10), which aims to promote more large-scal e commercial farming and increase value-added 
production.  The NAP3, on the other hand, aims to  raise productivity and improve the competitiveness 
of the sector, by deepening linkages with other sectors of the economy and creating new sources of 
growth.   Food security is also an important policy objec tive;  Malaysia's self-sufficiency ratio for 
major agricultural products was largely stab le during the review period (Table IV.1). 
6. The legislative and institutional framework of the agriculture sector has remained largely 
unchanged since the previous Review (Table AII.1).  The sector is regulated mainly by the Ministry 
of Agriculture and Agro-Based Industry (responsib le for the agri-food sector including crops, Malaysia WT/TPR/S/225/Rev.1 
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livestock, and fisheries), the Ministry of Plantation Industries and Commodities (responsible for the 
overall development of the plantation and the co mmodities subsectors including pepper, coca, palm 
oil, rubber, timber, and tobacco), and the Minist ry of Rural and Regional Development (responsible 
for raising the income level of rural residents).1  Special committees, comprising representatives from 
relevant ministries, including the Economic Planning Unit (EPU), have been set up at the ministerial 
level to ensure coordination within these ministries. 
Table IV.1 
Self-sufficiency ratio in major food commodities, 2005-08 
 2005 2006 2007a 2008b 
Crops    
Rice 72.00 68.60 72.23 73.00 
Vegetables 74.00 89.00 89.00 76.00 
Fruits 117.00 107.00 105.00 104.00 
Livestock      
Beef 21.15 21.78 24.88 25.90 
Mutton 8.60 8.99 8.75 9.15 
Pork 96.82 96.87 96.90 96.60 
Poultry 124.74 124.94 121.39 125.58 
Poultry eggs 108.70 109.06 111.38 114.20 
Milk 4.59 4.59 4.69 4.80 
Food fish 91.00 90.00 92.90 95.20 
a Provisional. 
b Estimates. 
Source:  Data provided by the authorities.  
7. During the period under review, labour productivity in  agriculture, together with forestry and 
fisheries, has been improving, although it remains s ubstantially lower than the national average.  The 
sector's contribution to GDP increased from 8.4% in 2005 to 10.2% in 2008, wh ile its share of total 
employment fell from 12.9% to 12.0% (Table I.2).  However, a labour shortage continues to force the 
sector to rely on foreign labour, which accounts for around 20% of total agriculture employment.  The 
sector also faces challenges such as increasing food im ports, greater competition in export markets, 
and the small size of farms (which inhibits mechan ization and the attainment of scale economies).   
8. The Government maintains price supports, and gr ants subsidies to inputs through government 
service programmes to promote the development of agriculture (Table IV.2).  Among these support 
programmes, the financing of a minimum price for rice has persistently been the biggest outlay (or 
one of the biggest), although in 2008 it was surpass ed by support allocated on drainage and irrigation 
facilities (Box IV.1).  In addition, Malaysia mainta ins retail price controls on:  sugar, some milk 
products (e.g. sweetened condensed milk), wheat fl our, cooking oil, some vegetables, and chicken 
(Chapter III).  Soft loans are available in the form of:  3F (Fund for Food), small and medium 
industries fund, and various other schemes, such as  the oil palm replanting scheme and the paddy 
credit scheme.2 
                                                      
1 Other related ministries are the Ministry of Health  for food safety, the Ministry of Domestic Trade, 
Co-operatives and Consumerism for food prices, and the Ministry of Natural Resources for the environment. 
2 Other schemes are the agriculture entr epreneur scheme for graduates, the bumiputera  community 
trade and industry scheme, the food production credit scheme, and the agro-youth scheme. WT/TPR/S/225/Rev.1 Trade Policy Review 
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Table IV.2 
Overview of domestic agricultural support measures, 2004, 2007, and 2008 
(RM million) 
Value 
(RM million) Type of measures Description 
2004 2007 2008 
Drainage and irrigation facilities General services that  benefit rural and small holding farmers 56.7 171.7 562.0 
Research and development General services  provided for most crops and agricultural 
programmes  59.2 60.0 101.3 
Marketing services General services provided for marketing of produce of 
smallholders 29.9 77.0 83.2 
Extension services  General services that  benefit rural and smallholding farmers, 
including pesticide inspection services and transfer of 
information and results of R&D to producers 4.7 3.8 4.36 
Price support and guaranteed 
minimum price Guaranteed minimum price and paddy price subsidy provided 
to paddy farmers in the contex t of poverty reduction and uplift 
of the socio-economic well-being of paddy farmers 476.6 444.0 448.0 
Fertilizer subsidy Aimed at increas ing productivity and encouraging good 
agricultural practices amongst smallholders 186.7 261.7 270.8 
Source : Information provided by the authorities.  
9. Malaysia has an overall liberal trade regime on agricultural products although the authorities 
consider the increasing food imports to be a challenge .  Its tariffs on agricultural imports are generally  
low, averaging at 2.8% (WTO definition) in  2009 (Table III.1).  Nevertheless, some non- ad valorem  
tariffs, particularly in agriculture, tend to  conceal relatively high rates (Chapter III).3  The authorities 
state that Malaysia continues to maintain non- ad valorem  duties (with high AVEs) for agricultural 
products to protect farmers or for public health reasons (alcoholic bevera ges and tobacco).  The 
Government is currently reviewing its use of non- ad valorem  duties in line with the Doha 
negotiations. 
10. A wide range of agricultural products are subject to import licensing and SPS measures;  
these include rice, round cabbages, unroasted coffee beans, palm oil, and milk and sugar.4  Licences 
are issued by the Ministry of Agriculture and Agro -based Industry, or the Ministry of International 
Trade and Industry (MITI), depending on the product.  As before, rice is imported only by BERNAS 
(Box IV.1).   
11. Malaysia began to apply tariff-rate quotas on 18  tariff lines at the HS 9-digit level from 
April 2008, covering poultry products, pork products, fresh milk, and cabbage (Table AIV.1).5  
Quotas are allocated on a first come, first served b asis, and some quotas were overfilled while others 
were not taken up.  The authorities state that TRQs are applied to allow a "reasonable" time for the industry to restructure, and are in line with Malaysia's commitments under the WTO. 
12. Malaysia has not applied the special safegua rd provisions under the WTO Agreement on 
Agriculture.
6  Malaysia also notified that it has had no  export subsidy programmes during the period 
                                                      
3 Some 6.1% of all agriculture tariff lines are subject to non- ad valorem  tariffs.  Three tariff lines (at 
HS 9-digit level) have AVEs higher than 1,000%, covering some banana products and some tobacco refuse 
(HS080300200, HS080300400, and HS240130000).  The average duty for agricultural products, including all 
AVEs, is 18.1%;  excluding these three lines, it is 7.2%. 
4 WTO document G/LIC/N/3/MYS/4, 17 October 2008. 
5 Prior to April 2008, the authorities state that no TRQ had been enforced although Malaysia has the 
right to implement TRQ on 73 lines at HS 9-digit level under its Uruguay Round commitments. 
6 WTO documents G/AG/N/MYS/21, 19 November 2008 and G/AG/N/MYS/23, 20 March 2009. Malaysia WT/TPR/S/225/Rev.1 
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under review.7  However, export restrictions apply:  crude  palm oil, rubber, pepper, and some timber 
products are subject to export taxes, and exports  of logging products from Peninsular Malaysia 
continue to be banned (Chapter III).   
Box IV.1:  Rice 
Rice is considered as a "strateg ic" sector in Malaysia, and the Government aims to maintain a 
self-sufficiency level for rice.  In 20 08, the self-sufficiency ratio was 73%. 
Rice is subject to a guaranteed minimum price (GMP) and a paddy price subsidy, to encourage paddy 
cultivation.  Under the GMP scheme, BERNAS undertakes to buy paddy from farmers at not less than the 
GMP if the market price is lower than the GMP;  curr ently the GMP is RM 75 per 100 kg for both long and 
medium grains.  Under the paddy price subsidy programme, the Government makes fixed payments 
(currently RM 24.81 per 100 kg) to farmers for the paddy they sell to any commercial rice mill;  this 
subsidy is in addition to the price received for the paddy.  The Governme nt also adopts a price control for 
certain types of rice consumed by th e lower income population:  i.e. lo wer grade rice has price ceilings.  For 
ST15 (lower grade), the price is fixed at RM 1.65/kg for Peninsular Malaysia and RM 1.80/kg for Sabah 
and Sarawak;  for SST5 (lower grade) and SST10 (l ower grade), the price ce ilings are RM 2.60/kg and 
RM 2.40/kg, respectively. 
BERNAS, a private enterprise involved in state trading, performs certain social obligations on behalf of the 
Government on rice.  For example, as a buyer of last resort for paddy farmers, BERNAS is obliged to 
purchase paddy from paddy farmers at the GMP if the market price is below the GMP.  BERNAS also 
maintains the national rice stockpile on behalf of the Government.  In addition, BERNAS has the exclusive 
right to import rice until 2011 with an option for a further five-year extension.  When importing rice, 
according to the authorities, BERNAS implements a transparent purchas ing system with open tendering 
procedure.  BERNAS does not regulate the retail prices for rice;  these are regulated by the Control of 
Paddy & Rice Section under the Ministry of Agriculture and Agro-based Industry.  However, as the only 
authorized importer of rice (a monopsony buyer), BERNAS tends to have the market power to negotiate 
lower prices with its suppliers.  
Source:  Information provided by the authorities. 
 
(3) MINING AND QUARRYING  
13. In Malaysia, mineral products (apa rt from crude oil and gas) are the property of the states.  
The main laws and regulations governing the sect or include the Mineral Development Act 1994 
(effective 1998), the State Mineral Enact ments, and the State Quarry Rules.8  At the federal level, 
mining is regulated mainly by the Ministry of Natural Resources and Environment, through its 
Minerals and Geosciences  Department.  State governments are responsible, inter alia , for issuing 
mineral licences and mining leases.  Private (domestic and foreign) companies can obtain licences or leases to engage in exploration or mining of mineral products;  requirements are the same for 
domestic and foreign invested enterprises. 
14. In 2008, growth in the mining and quarrying sect or was negative (-0.8%) (Table I.2).  The 
development of the sector is guided mainly by the Second National Mineral Policy (NMP2) launched 
in January 2009, aimed at ensuring the sustainable development and optimum use of minerals in an 
                                                     
 
7 WTO documents G/AG/N/MYS/20, 14 November 2008 and G/AG/N/MYS/24, 31 March 2009. 
8 The Mineral Development Act provides the framework for the inspection and regulation of mineral 
exploration and mining operations.  The State Mineral Enac tments have been adopted by all states except Perlis 
and Sabah.  States that adopted the Enactment also developed their own State Mineral Regulations to set out 
detailed procedures for mineral exploration and mining operations.  Sabah, Kelantan, Selangor, Terengganu, 
Pahang, and Negeri Sembilan also regulate quarry activities under State Quarry Rules. WT/TPR/S/225/Rev.1 Trade Policy Review 
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environmentally sound and responsible manner.  A major policy objective is to raise earnings from 
natural resources by increasing the degree of domestic  processing.  Hence, the Government has been 
providing incentives to set up mineral processing plants;  corporate income tax may be fully exempted 
for ten years, and import tariffs and sales tax are exempted on all raw materials, machinery, 
equipment, and components imported for domestic processing.  Although Malaysia abolished export 
taxes on most mineral products in the early 1990s an d in 2003, it still applies export taxes at 5% on 
12 tariff lines at the HS 8-digit level.9  These export taxes may act as implicit subsidies to downstream 
processing (Chapter III). 
15. Foreign equity participation of up to 100% is permitted in the extraction, mining or 
processing of mineral ores.  When approving these projects, the Government considers:  the 
investment level, technology, a nd risk involved;  availability of  Malaysian expertise;  and the 
value-added level.  Companies must also obtain approval from state governments (e.g. for exploration 
rights). 
(4) OIL AND GAS 
16. Malaysia's crude oil and gas deposits are ow ned entirely by Petroliam Nasional Berhad 
(Petronas), a corporation wholly owned by the Government.  Under the Petroleum Development Act 
1974, Petronas has exclusive rights of ownership, e xploration, and production of petroleum, and is 
responsible for the planning, investment, and regulati on of all upstream activities.  Petronas is also the 
biggest contributor to the government budget, acc ounting for 39.3% of the federal government's 
revenues in 2008, up from 36.4% in 2007.10 
17. In addition to Petronas, other upstream pe troleum and gas companies in general are 
substantial sources of government re venue in Malaysia, mainly because  they pay a higher tax rate.  
Under the Petroleum Income Tax Act 1967, upstream  petroleum and gas companies are subject to 
38% tax on income from the sale of crude oil and natural gas extracted from Malaysia, or from the 
sale of a type of petroleum spirit.  Further, an e xport duty of 10% applies to crude oil and condensate, 
but not to natural gas.  Income derived from downs tream petroleum activities, such as the refining of 
petroleum or the processing of petroleum products , are taxed at the rate of statutory 25%. 
18. Malaysia has gradually reduced (and mostly e liminated) import tariffs on petroleum and gas 
and they are not subject to any import licensing requirements.11  However, foreign investment in the 
upstream petroleum and gas industry is accepted onl y in the form of production-sharing contracts 
(PSCs), between foreign investors and Petronas;  in financial year 2008, 4 PSCs were signed, and a 
total of 67 PSCs were in operation (as at 31 Marc h 2008).  Foreign investment in the downstream 
petroleum and gas industries, on the other hand, is not restricted:  up to 100% foreign equity 
participation is allowed.   
19. As Petronas is the regulator of upstream activiti es in both oil and gas, companies wishing to 
participate in the upstream sector must obtai n licences from Petronas.  Downstream petroleum 
industry activities are regulated by the Ministry of  Domestic Trade, Co-operatives and Consumerism 
(MDTCC), and the Ministry of International Trad e and Industry (MITI).  MDTCC issues licences for 
                                                      
9 Export duties on unroasted iron pyrites, silica sand s and quartz sands;  and potash and soda feldspar, 
were abolished in 2003.  However, 12 lines at th e HS 8-digit level are subject to 5% export duty. 
10 Reportedly, the Government is to seek more f unds from Petronas in 2009, due to its increased 
spending resulting from the fiscal stimulus package ( Financial Times , "Petronas profits hit by increase in 
payments to state", 25 June 2009). 
11 Malaysia has been gradually eliminating import tariffs on oil and gas since 1994.  In 2009, for oil 
imports, three tariff lines at the HS 9-digit level have duties at 5%:  270900900, 271011100, and 271019200. Malaysia WT/TPR/S/225/Rev.1 
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the marketing, storage, and distribution of petr oleum and certain petroche mical products, and MITI 
issues licences for the processing and refining of petroleum and the manufacture of petrochemical products.  Downstream activities of the gas industr y, on the other hand, are regulated by the Energy 
Commission under the Ministry of Energy, Green Technology and Water.   
(5) M
ANUFACTURING  
(i) Overview 
20. Manufacturing in Malaysia is relatively open to  both trade and foreign investment, with the 
notable exception of automotive products.  The shar e of manufacturing in Malaysia's international 
trade continued to fall during the period under review , from 74.5% in 2005 to 54.2% in 2008 of total 
exports, and from 79% to 65.3% of total imports (Tab les AI.1 and AI.2).  Major manufactured exports 
and imports are machinery and transport equi pment, in particular office machines and 
telecommunication equipment. 
21. Sectoral objectives are specified under various plans including the Ninth Malaysia Plan 
2006-2010 (9MP), and the Third Industrial Master Plan (IMP3).  The 9MP emphasizes the application of high technology and the production of higher va lue-added products.  The IMP3 specifically lists 
12 subsectors for further development, covering, inter alia :  electrical and electronic products, 
transport equipment, and petrochemicals.
12   
22. The Government continues to improve the i nvestment environment in manufacturing, and 
both border and internal measures are used as part of Malaysia's industrial development policy.  
Malaysia's import duties are mostly ad valorem , although a few specific duties are imposed.13  I n  
2009, 53.5% of tariff lines for manufacturing imports (ISIC Rev 2) were duty free, and the average 
tariff for manufacturing products was lowered fro m 9.6% in 2005 to 8.7%.  The Government 
encourages manufacturers to obtain raw material s as well as machinery and equipment locally.  
However, raw materials, components, and machiner y and equipment that are not available locally 
may be imported duty free.  In addition, some  manufactured goods are subject to non-automatic 
import licensing (Chapter III):  these include some motor vehicles and motorcycles, batik sarong, and 
some steel flat product.14 
23. The Government continues to promote e xports of manufactured products through, inter alia,  
income tax exemptions.  If the value of exports of  a manufacturing company increases by at least 50% 
(from the previous year), 30% of its increased net e xport income may be exempted from income tax.  
If a manufacturing company succeeds in penetrating new markets, 50% of its increased net export 
income may be exempted;  if it wins the Export Excellence Award (Merchandise Category) by MITI, 
100% of increased export value may be exempted.15  In addition, manufacturing exports have been 
facilitated by, inter alia , exemptions and drawbacks for import duties, simplified customs procedures, 
                                                      
12 MITI online information, Third Industrial Master Plan - Highlights of IMP3.  Viewed at:  
http://www.miti.gov.my [04.11.2008].  Other manufactur ing subsectors are:  medical devices, machinery and 
equipment, textiles and apparel, metals, and resource-ba sed industries such as pharmaceuticals, wood-based 
industries, palm oil-based industries, and food processing. 
13 Non- ad valorem  duties apply to 55 lines at the HS 9-digit level for manufacturing imports.   
14 WTO document G/LIC/N/3/MYS/4, 17 October 2008. 
15 The exemption is not granted if the company receive s any incentives (except for deduction for 
promotion of exports) under the Promotion of Investment Act 1986, the Reinvestment Allowance, and 
Allowance for Increased Exports or Deduction for Cost on Acquisition of a Foreign Owned Company 
(MATRADE online information.  Viewed at:  http://w ww.matrade.gov.my/cms/content.jsp?id=com.tms.cms. 
article.Article_6c9d2a10-7f000010-290f290f-73c76693 [11.10.2009]). WT/TPR/S/225/Rev.1 Trade Policy Review 
Page 54 
 
 
concessionary credits, and insurance and guarantees (C hapter III).  For example, free industrial zones 
and licensed manufacturing warehouses provide minimum customs formalities for export-oriented industries.  Moreover, the Government has been  encouraging the establishment of international 
procurement centres (IPCs) to make Malaysia a major distribution centre in the region. 
24. However, Malaysia maintains certain export restrictions:  a number of manufactured goods 
are subject to export licensing and export taxes, with a view to discouraging their exportation 
(Chapter III).
16  Reduced exports may divert some supply of these inputs to the domestic market, 
leading to downward pressure on domestic prices  and thus acting as an implicit subsidy for the 
domestic processing industries (Chapter III). 
25. The Government continues to welcome fore ign investment, and 100% foreign equity 
participation is allowed in the manufacturing sector.  Export requirements in foreign investment have 
been removed.17  Equity holdings in all manufacturing projects were fully liberalized in June 2003;  
although equity and export conditions imposed on comp anies registered prior to 17 June 2003 are to 
be maintained, companies can apply for the removal of these restrictions. 
26. Malaysia is also trying to reduce business costs by, inter alia , lowering corporate income tax 
from 28% in 2006 to 25% in 2009, and adopting an automatic approval system for manufacturing 
licences.  Under the Industrial Coordination Act 1975 (ICA), manufacturing companies with shareholders' funds of RM 2.5 million and above, or  employing 75 or more full-time paid employees, 
must apply for manufacturing licences from MITI.  A licence is valid throughout the lifespan of the 
company.  From 1 December 2008, these licences are issued automatically, with a processing time of 
two days.  However, automatic approval does not apply to, inter alia :  projects with implications for 
security, safety, health, environment, and re ligion, where "evaluation" is still required.
18  T h e  
Government also established the Special Task  Force to Facilitate Business (PEMUDAH) in 
February 2007, to improve the business envi ronment and transparency (Chapter II). 
27. Companies with shareholders' funds below th e RM 2.5 million threshold (e.g. SMEs) are 
exempted from obtaining manufacturing licences.  Al so, given Malaysia's small labour force, the 
Government no longer promotes labour-intensive ma nufacturing operations:  if a new manufacturing 
project has a capital investment/employee ratio be low RM 55,000, it is considered labour intensive 
and does not qualify for a manufacturing licence.19  The authorities consider that MITI, through its 
Malaysian Industrial Development Authority (MI DA) and SME Corporation Malaysia, facilitates 
companies (with or without manufacturing licenses) by, for example, "handholding" these companies 
until their projects are implemented. 
                                                      
16 For 2009, export duties apply to 62 tariff lines at the HS 9-digit level, mainly covering basic metal 
products. 
17 From 1998, for investment in new and expansion or diversification projects, foreign investors could 
hold 100% of the equity irrespective of the level of exports, apart from a few exceptions (this relaxation did not apply to specific activities and products that Malaysian companies were able to produce, including:  paper 
packaging, plastic packaging, plastic injection moulded components, metal stamping and metal fabrication, wire 
harness, printing and steel service centres).  These exceptions were removed in 2003, when foreign investors 
were allowed to hold 100% of the equity in all investme nts in new projects, and in expansion or diversification 
projects by existing companies. 
18 Automatic approval also does not apply to:  projects proposed to be located in Sabah and Sarawak;  
activities subject to Environmental Impact Assessment (EIA) approval from the Department of the 
Environment;  and projects requiring approval under the Petroleum Development Act 1974, the Ministry of Health, or the Atomic Energy Licensing Board. 
19 Exemptions include:  if the value added is 20% or more;  if the project falls within the List of 
Promoted Activities and Products;  if the company is high-tech;  if the company is located in the promoted areas;  and if the managerial, technical, and supervisory (MTS) index is 15% or more. Malaysia WT/TPR/S/225/Rev.1 
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(ii) Automobiles 
28. Malaysia's car market has long been sheltere d from foreign competition by both tariff and 
non-tariff measures, and has been dominated by its national cars.  Proton and Perodua jointly accounted for 62.4% of vehicles sold in 2008 (75.2% in 2004 and 58.5% in 2005).  Arguably, these 
measures have resulted in the sector's lack of inte rnational competitiveness, as total exports of motor 
vehicles accounted for only 5% of total industry vo lume.  However, the au thorities maintain that 
Malaysia's automotive sector h as been successful in taking a larg e share of the domestic market. 
29. Malaysia's National Automotive Policy, intr oduced in March 2006, aims to build a 
competitive automotive sector in Malaysia and prom ote exports of automotive products.  To achieve 
these objectives, the Government lowered border pr otection for the automobile industry:  in 
March 2006, import duties were lowered to 30%  for complete built-up (CBU) vehicles (from 
35-50%), and remained at 10% for complete knocked-down (CKD) vehicles.  Lower duties apply to imports from ASEAN countries, and under Malaysia's bilateral agreements with Japan and Pakistan 
(Table AIV.2).
20  The Government welcomes foreign invest ment in the automobile section, and 100% 
foreign equity is allowed.  
30. Further, in October 2009, after reviewing th e NAP, MITI announced liberalization measures 
of the automotive sector.21  As of 1 January 2010, the freeze on issuance of new manufacturing 
licenses are lifted on, inter alia , luxury passenger vehicles with engine capacity of 1.8 litres and 
above, with prices not less than RM 150,000, and h ybrid and electric vehicles.  There are no equity 
conditions imposed on these licenses.  The Government  particularly wishes to find a strategic partner 
for Proton, with a view to enhancing its compe titiveness in a global market.  To encourage exports, 
the Government increased income tax exemptions :  if the exports of an automotive company 
increased by at least 30%, 30% (from previously 10%) of the increased export income may be 
exempted from income tax;  if the exports in creased by at least 50%, 50% (from 15%) of the 
increased export income may be exem pted from income tax.  Also, Ma laysia is to gradually phase out 
its approval permits (AP) system.  The AP syst em, like import licensing, was designed to provide 
bumiputera  companies easy access into the automobile distribution and services sector22, and for the 
purpose of data collection and monitoring.  This sy stem is to be terminated in 2015 (for open APs), 
and 2020 (for franchise APs).   
31. Nevertheless, the national car industry remains protected.  Fo r example, at the time of 
Malaysia's previous Review, excise tax rebates were accorded only to domestic manufacturers;  it was 
not clear to the Secretariat whether they have been revised.23  Malaysia also started to apply a Vehicle 
Type Approval (VTA) process from January 2009, w ith a view to preventing the import and sale of 
                                                      
20 Automobiles from ASEAN countries, and European, Japanese, and U.S.-made cars produced in 
ASEAN countries with a minimum 40% local content, are  subject to the ASEAN Common Effective Tariff 
(CEPT) rate of 5%, and are to be exempted from import duties in 2010.  Import duties are zero for CKDs from 
ASEAN countries.  Under the MJEPA, duty rates for CBUs and CKDs from Japan are 30% and 0, respectively.  
Tariffs on imported cars above 2,000cc from Japan are exp ected to be eliminated by 2011;  this offers some 
space for Proton and Perodua, as both mainly manufac ture cars below 2,000cc.  The MJEPA also covers 
economic and technical cooperation to improve capacity building in the automotive sector in Malaysia.  The authorities hope that, through assistance from Japanese expe rts in the field of testing, training, and cooperation, 
the international competitiveness of Malaysian automotive industry can be enhanced.  Duty rates for CBUs and 
CKDs from Pakistan remain at 30% and 10%, respectively. 
21 MITI online information. Viewed at:  http://w ww.miti.gov.my/cms/content.jsp?id=com.tms.cms. 
article.Article_9971dce0-c0a81573-3edb3edb-686eb8ad [02.11.2009]. 
22 The authorities regard this as a measure to achieve Malaysia's socio-economic objectives. 
23 WTO (2006). WT/TPR/S/225/Rev.1 Trade Policy Review 
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"sub-standard" vehicles, as well as parts and components, in Malaysia.24  In accordance with the 
revised NAP, imports of used commercial vehicles, wh ich are currently allowed, are to be prohibited 
from 2016, and imports of used parts a nd components will be prohibited from 2011. 
32. Further, some protective measures were adopted in the wake of the global crisis, to promote 
the development of national cars:  under Mala ysia's temporary auto-scrapping scheme, the 
Government rebates RM 5,000 for c onsumers replacing a car aged more than ten years with a national 
brand vehicle (Proton and Perodua) in 2009.25  According to the authorities, part of the rebate is 
financed by Proton and Perodua. 
(6) SERVICES  
(i) Overview 
33. During the period under review, the services sect or has been the main driving force of 
Malaysia's economic growth, growing at 7.2% in 2008 (Table I.2).  In 2008, services accounted for 
45.3% of GDP and 52.0% of total employment, indi cating that labour productivity in the sector is 
considerably lower than in the economy on average.   However, a World Bank study found that the 
sector has been catching up with Korea and Ch inese Taipei in terms of productivity, and has 
contributed significantly to employment:  it has acc ounted for more than 85% of the increase in jobs 
since 1996.26  Trade in services recorded its first surplu s in 2007, and remained in surplus in 2008.27 
34. Sectoral policy objectives are defined in the Ninth Malaysia Plan 2006-2010 (9MP), and the 
Third Industrial Master Plan (IMP3).  Under the 9MP, the growth of services is expected to continue, 
and some subsectors, including finance and insu rance, are expected to grow even faster.28  The IMP3 
specifically identified eight subsectors for furthe r development:  business and professional services, 
ICT services, logistics, distribution, construction,  education and training, healthcare, and tourism 
services.  Malaysia aims to increase the share of  the services sector in GDP from around half to 60% 
by 2020 in an effort to establish a knowledge-b ased economy that would be less reliant on 
manufactured exports.   
35. In comparison with manufacturing (with excep tion of automobiles), services activities have 
been relatively closed to international competition, with FDI restrictions being major obstacles.  To 
increase productivity, and thus competitiveness in services, the authorities have been progressively 
liberalizing foreign investment in the sector.  On 22 April 2009, the Government announced the 
elimination, with immediate effect, of foreign equity restrictions on 27 services subsectors;  in the areas of health and social services, tourism, transport, business services, and computer and related 
services.
29  A week later, restrictions were relaxe d on foreign investment in financial services 
(Chapter II(6)).  These liberalization initiatives ha ve been complemented with a support programme 
for the domestic services industry;  a services sector capacity development fund of RM 100 million 
(US$28 million) has been established under th e First Economic Stimulus Package.   
                                                      
24 The authorities expect this process to enhance safety.   
25 MIER (2009). 
26 World Bank (2008).   
27 Trade in services amounted to RM 201.8 billion in  2008, an increase of 1.3% from 2007.  In 2008, 
Malaysia was the 30th leading exporter and importer of services. 
28 Other subsectors expected to grow faster are real estate and business servi ces, wholesale and retail 
trade, hotels and restaurants services. 
29 Prime Minister Office online information.  Viewed at:  http://www.pmo.gov.my/?menu=news& 
page=1729&news_id=39&news_cat=4 [12.10.2009]. Malaysia WT/TPR/S/225/Rev.1 
 Page 57 
 
 
36. The approval procedure for foreign investment has also been simplified.  Until June 2009, 
foreign acquisitions, mergers, and takeovers of Malaysian companies had to be approved by the 
Foreign Investment Committee (FIC).  Howeve r, on 30 June, the Government announced the 
deregulation of the FIC guidelines, including the repeal of FIC's bumiputera  participation 
requirement.  Thus, the FIC no longer processes any acquisitions, mergers or takeovers;  nor does it 
impose any equity conditions, although the equity  conditions imposed by sector-specific regulators 
continue to apply.  Equity restrictions are no l onger imposed on sectors not considered "strategic";  
strategic sectors, nonetheless, will not be liberalized  (Chapter II(6)).  The Government also set up a 
private equity fund, Ekuiti Nasional Berhad (EKU INAS) to promote investment in sectors with 
growth potential (notably in services). 
37. As in the previous Review, government-linke d companies (GLCs) continue to play an 
important role in financial, transport, and te lecommunication services.  The Government has placed 
some GLCs into the GLC Transformation Programme to increase their efficiency and competitiveness 
(Chapter III(4)(vi)). 
38. To facilitate investment in the services sect or, a Malaysian Services Development Council 
was established in January 2007, and a Cabinet Committee on the Liberalization of the Services 
Sector was set up in February 2009.  Furtherm ore, in September 2009, a National Committee for 
Approval of Investments in the Services Sector  was established under th e Malaysian Industrial 
Development Authority (MIDA).  It serves as a focal  point to receive and process applications for 
investment (excluding, inter alia , financial services, air transport, and utilities).30  
39. Malaysia has made GATS-plus commitments in  some services sectors in its regional and 
bilateral trade agreements (Chapter II(5)).  In its GATS schedule, Malaysia made commitments in 
7 out of 12 sectors.31  Malaysia continues to participate ac tively in the Doha Round negotiations, to 
ensure a successful outcome that takes into account the capabilit y of domestic service providers 
(Chapter II(5)(i)).  Malaysia submitted its conditi onal initial offer and revised offer on services in 
2004 and 2005, respectively.32   
(ii) Financial services 
(a) Overview 
40. During the period under review, the financial ser vices sector has been developing rapidly, 
growing at 7.7% in 2008 (Table I.2).  As in the previous Review, banking re mains the largest manager 
of financial assets (Table IV.3).  The Central Bank,  Bank Negara Malaysia (BNM), is the regulator of 
financial institutions including banks, money-broking business, and insurance companies.  
Applications to provide banking and insurance services must be approved by the BNM.  The 
Securities Commission (SC) regulates Malaysia's capita l market.  The authorities state that Malaysia's 
financial system remained stable  during the global economic downturn.33 
                                                      
30 Other exceptions are the economic development corridors, the Multimedia Super Corridor, Bionexus 
status companies, and distributive trade. 
31 WTO document GATS/SC/52, 15 April 1994.  Th e seven sectors are:  professional services, 
communications services, construction and related services , financial services, health -related social services, 
tourism and travel-related services , and transport services.  Malaysia did not make any commitments in 
distribution, education, environmental services, no r in recreational, cultural and sporting services. 
32 WTO documents TN/S/O/MYS, 31 January 2005, and TN/S/O/MYS/Rev.1, 31 January 2006.   
33 The authorities point out that measures adopted by the Government and the Central Bank helped to 
preserve confidence and overall stability in the financial system.  The impact of the global crisis on the domestic WT/TPR/S/225/Rev.1 Trade Policy Review 
Page 58 
 
 
Table IV.3 
Share in total assets of the financial system, by institution, 2005-08  
(RM billion and per cent) 
 2005 2006 2007 2008 
Total (RM billion) 1,908. 5 2,091.2 2, 475.9 2,579.6 
 Share in total assets (per cent) 
Banking system 67.1 67.7 66.7 65.1 
Bank Negara Malaysia 15.5 15.4 17.2 13.4 
Commercial banksa 44.1 45.5 42.4 42.2 
Investment banks 3.8 3.2 3.8 2.3 
Finance companiesa 1.4 n.a. n.a. n.a. 
Islamic banks 2.3 3.5 3.3 7.2 
Non-bank financial intermediaries 32.9 32.3 33.3 34.9 
Provident, pension, and insurance funds 22.2 22.4 21.2 22.1 
Employees Provident Fund 13.8 13.9 12.9 13.4 
Other provident & pensi on funds 3.0 3.0 3.1 3.2 
Life insurance funds 4.4 4.3 4.4 4.6 
General insurance funds 1.0 1.2 0.9 0.9 
Development financial ins titutions 5.2 5.5 5.2 5.6 
Other financial intermediaries 5.5 4.5 6.9 7.3 
n.a. Not applicable. 
a Figures for commercial banks after 2006 include assets of finance companies.  
Source:  Bank Negara Malaysia (2006), Annual Report 2005;  Bank Negara Malaysia (2006) and (2007), Financial 
Stability and Payment Systems Reports 2006 and 2007;  and Bank Negara Malaysia (2009), Annual Report 2008 . 
41. Although financial services are still protected from foreign investment, protection has been 
relaxed;  the Government has been liberalizing th e sector in accordance with the capacity of domestic 
service providers to cope with the changing environment.  In April 2009, the BNM announced a liberalization package for the conventional and Islamic financial sectors.  Fore ign equity limits were 
increased from 49% to 70% for domestic Islamic banks  (provided they maintain paid-up capital of at 
least US$1 billion), investment banks, insurance companies, and takaful  (Islamic insurance) operators.  
Foreign equity above 70% is considered on a case- by-case basis for insurance companies, if deemed 
able to facilitate the consolidation and rationaliza tion of the insurance industry.  More licences for 
financial service providers are to be issued and ope rational flexibilities given to locally incorporated 
foreign banks, insurance companies, and takaful operators. 
(b) Banking 
42. The authorities consider Malaysia's financial syst em able to meet the financial needs of the 
economy, even under a more adverse scenario of economic contraction.
34  Although Malaysia's 
banking sector was not insulated from the global fi nancial crisis, its risk-weighted capital ratio 
(RWCR) was at 12.7% at end 2008, well above the minimum requirement (8%) (Table IV.4).  In 
2008, the banking system remained the largest provi der of financing for the economy, with bank loans 
accounting for 42% of total loans.  With an excess  capital position of RM 38.8 billion, banking sector 
profits grew by 8.3%, to RM 19.2 billion (before tax) in 2008.35  The net non-performing loan ratio in 
the banking sector also continues to decline, from 4.8% in 2006 to  2.2% in 2008.  However, the 
                                                                                                                                                                     
financial sector remained well contained due to limited exposure to the affected assets and affected institutions 
linked to the financial crisis. 
34 BNM (2008), p. 38. 
35 BNM (2008), p. 3. Malaysia WT/TPR/S/225/Rev.1 
 Page 59 
 
 
growth of net interest income was lower in 2009 than in 2007, at 8% (compared with 10.8%), due 
partly to the narrowing interest rate spreads reflecting greater competition.36 
Table IV.4 
Performance of the Malaysian banking system, 2006-08 
(Per cent) 
Financial year ending 2006 2007 2008a 
Risk weighted capital ratio  13.5 13.2 12.7 
Core capital ratio  10.7 10.2 10.6 
Return on assets  1.3 1.5 1.5 
Return on equity 16.2 19.7 18.5 
Liquid assets to total assets 8.0 9.4 10.2 
Liquid assets to short-term liabilities 10.3 11.9 12.9 
Net NPL ratio (3 months)b 4.8 3.2 2.2 
Duration weighted net position to capital base 7.5 4.4 4.4 
Net open positions in FX to capital base 4.7 4.9 4.6 
Net open positions in equities to capital base 2.6 2.5 0.9 
a Preliminary.  
b Net NPL ratio = (NPL - interest in suspense - specific provi sions)/(gross loans - interest in  suspense - specific provisions) . 
Source: Bank Negara Malaysia (2009), Financial Stability and Payment Systems Report 2008,  p. 29. 
43. Against the background of the global crisis , the Government is adopting precautionary 
measures to protect consumers, providing a full gu arantee for bank deposits.  The Malaysia Deposit 
Insurance Corporation (MDIC), established in September 2005, provides explicit protection for 
eligible deposits of member institutions thr ough Malaysia's deposit insurance system.  On 
16 October 2008, its coverage was raised from RM 60,000 per depositor per member institution to full 
guarantee on all ringgit and foreign currency depos its with commercial, Islamic, and investment 
banks, as well as deposit-taking financia l institutions regulated by the BN M.  This full guarantee is to 
be provided until December 2010. 
44. Banking services are provided by commercial ba nks, investment banks, and Islamic banks 
(Table AIV.3).  The development of investment ba nks started after the introduction of the framework 
for investment banks in 2006, through the tran sformation of merchant  banks, stock-broking 
companies, discount houses, and universal brokers;  thus investment banks can engage in stock 
broking business.  The sector is regulated under th e Banking and Financial Institutions Act 1989, and 
the Islamic Banking Act 1983 (for Islamic banks).  BNM has overall superv isory and regulatory 
responsibility for banks, except investment banks, wh ich are jointly regulated by the BNM and the 
SC.  Banking licences are granted by the Minister of Finance, upon recommendations by the BNM.   
45. In line with the objective of developing a dive rsified and efficient financial services sector, 
under the Financial Sector Master Plan (FSMP), in April 2009, Malaysia announced measures to relax 
foreign investment restrictions in financial ser vices to allow for greater foreign participation 
(Table IV.5).37  All foreign banks must be locally incor porated to operate in Malaysia.  Locally 
incorporated foreign commercial banks were given mo re operational flexibilities:  they are allowed to 
open up to ten microfinance branches from 2009 and up to four new branches in 2010.  
                                                      
36 BNM (2009), p. 18. 
37 These measures include the i ssuance of up to two new commercial banking licences and two new 
Islamic banking licences in 2009 to foreign interests, as well as three new commercial banking licences in 2011 to foreign banks that can offer "significant value propositions" to Malaysia. WT/TPR/S/225/Rev.1 Trade Policy Review 
Page 60 
 
 
Table IV.5 
Foreign equity restrictions in  financial institutions, 2009 
Sector  Foreign equity restrictions 
(aggregate maximum percentage permitted per institution) 
Conventional banking  
Commercial banks 30% 
Locally incorporated foreign banks 100% 
Investment banks/Merchant banks 70% (increas ed from 30% in 2005 and from 49% in 2009) 
Islamic banks  
Foreign Islamic banks  100% 
International Islamic banks 100% 
Domestic Islamic banks 49%.  Flexibility to increase to 70% is gi ven to existing Islamic banks wishing to 
increase operation scale by entering into stra tegic partnerships with foreign players 
(must maintain a paid-up capital of at least US$1 billion). 
Insurers  
Insurance companies 70% (increased from 30% in 2006 and from 49% or 51% in 2009).  A higher limit is 
considered on a case-by-case basis. 
Takaful  
Islamic insurers ( takaful operators) 70% (increased from 30% in 2005 and from 49% in 2009) 
International takaful  operators 100% 
Islamic reinsurers ( retakaful  operators) 100% 
Source: Information provided by the authorities.  
46. Banks are subject to the BNM's prudential requi rements, which are generally in line with 
international practices.38  The requirements are generally the same for domestic and foreign-owned 
banks.39  Since its previous Review, Malaysia h as revised the risk-weighted capital adequacy 
framework (RWCAF) to bring it into line with Basel II. 
Offshore banking 
47. The Labuan International Business and Financial Ce ntre (IBFC), Malaysia's only international 
financial centre, was set up in 1990 with a view to strengthening the financial services sector in 
Malaysia.  Under the Offshore Banking Act 1990, o ffshore financial services are regulated by the 
Labuan Offshore Financial Services Authorit y (LOFSA), which is in charge of, inter alia , the 
incorporation and registration of companies in Labua n.  There are no foreign-ownership restrictions 
for offshore banks in the IBFC.  Offshore companies and financial institutions in Labuan benefit from, 
inter alia , tax and non-tax incentives.  For example, under the Labuan Offshore Business Activities 
Tax Act 1990, offshore companies and financial institutions may choose to  pay tax at a rate of 3% of 
its net profits or a fixed amount of RM 20,000, instead of a statutory corporate income tax at 25%.  This policy was revised in 2008, and offshore compani es may choose to be taxed at the statutory rate 
of 25% and benefit from Malaysia's tax treaties.  Malaysia has recently announced more liberalization 
measures to provide a more flexible business envi ronment for offshore financial institutions:  from 
2010, offshore banking institutions meeting certain criteria may have a physical presence onshore. 
Islamic banking 
48. Malaysia aims to establish itself as an in ternational centre for Islamic banking.  In 
August 2006, the Government launche d the Malaysia International Is lamic Financial Centre (MIFC) 
                                                     
 
38 APEC online information.  Viewed at:  http ://www.apec-iap.org/docume nt/MAS_2008_IAP.htm. 
[20.03.2009]. 
39 However, the minimum capital requirements are RM 2 billion for domestic banks, and 
RM 300 million for foreign-owned banks.  The authorities state that the requirement of RM 300 million is for a 
single foreign bank, and the requirement of RM 2 billion is for a domestic banking group. Malaysia WT/TPR/S/225/Rev.1 
 Page 61 
 
 
initiative to further strengthen Malaysia's position as a centre in international Islamic finance, through, 
inter alia , tax incentives and relaxation of foreign inv estment restrictions.  More liberalization 
measures were adopted in April 2009, when the Gove rnment announced that up to 70% foreign equity 
(up from 49%) is allowed for existing Islamic banks wishing to increase their operations by entering 
into strategic partnerships with foreign players.  These banks must maintain a paid-up capital of at 
least US$1 billion.  Foreign Islamic banks (includi ng subsidiaries of locally incorporated foreign 
banks), and international Islamic banks can  have foreign equity up to 100%.   
(c) Insurance 
49. Total premium income of the insurance sector grew at 8.1% in 2008, and reached 
RM 31.4 billion, with life premiums representing two thirds of the total.40  Despite its rapid growth, 
there is room to increase insurance density and penetration in Malaysia.  Insurance expenditure 
in 2008 was US$345.4 per capita (US$225.9 on life and US$119.5 on non-life insurance), placing Malaysia 46
th in the world;  the penetration rate was 4.3% (2.8% for life and 1.5% for non-life 
insurance), putting Malaysia 33rd worldwide.41   
50. The insurance sector is regulated by the BN M under the Insurance Act 1996, together with 
BNM guidelines and circulars.42  Insurance companies must obtain licences from the Ministry of 
Finance, upon recommendations from the BNM.  BNM is in charge of issuing licences for insurance 
broking business.  Licences are not required for insura nce agents;  instead, agents must register with 
relevant industry associations, namely the Life In surance Association of Malaysia for life insurance 
agents, and the General Insurance Association of Malaysia for general insurance agents.  Direct 
insurers are not allowed to offer both life and general insurance bu sinesses.  However, this does not 
apply to an insurer who carried out both types of  business before the Insurance Act 1996 was enacted.  
Insurers are not allowed to operate any activities not  connected with, or for the purpose of, insurance 
business, unless approved by the BNM.  Nonetheless, they are allowed to link-up with commercial 
banks to distribute or market insurance products under "bancassurance" arrangements. 
51. Foreign participation is significant in Malaysia 's insurance industry.  In 2008, 20 of the 
49 insurance companies in Malaysia were forei gn owned, accounting for 71% and 41% of total life 
and general premiums, respectively (Table AIV.4) .  At end 2008, foreign shares accounted for 45%, 
64%, and 61% of total equity, assets, and premiums in the insurance sector.  
52. Despite the significant share of foreign player s, Malaysia still has restrictions on foreign 
participation in the insurance sector.43  Foreign professional reinsurers are allowed to operate as 
branches in Malaysia;  other insurers must be inco rporated in Malaysia.   However, the Government 
has been relaxing these restrictions, with a view to, inter alia , further strengthening the 
competitiveness of the insurance sector.  From Apr il 2009, foreign equity limits were increased from 
49% to 70% for insurance companies.  Foreign equity beyond 70% is considered on a case-by-case 
basis for players deemed able to facilitate the consolidation and rationalization of the insurance 
                                                      
40 Swiss Re (2009). 
41 Swiss Re (2009).  According to the authorities, Malaysia ranked 2nd in ASEAN in terms of the 
insurance penetration rate;  the ASEAN average rate was 3%. 
42 The Insurance Act and its Regulations were amended in 2005 to set out a legislative licensing 
framework for financial advisers in Malaysia.  As a ne w category of insurance intermediary, financial advisers 
provide advice to consumers on various financial products including insurance. 
43 As specified under Malaysia's Schedule of Specific Commitments in GATS, cross-border solicitation 
and advertising of direct insurance is not allowed in Malaysia.  The Insurance Act 1996 also prohibits an 
insurance agent, broker or financial adviser from acting on behalf of or negotiating a contract of insurance with an insurance company not licensed in Malaysia. WT/TPR/S/225/Rev.1 Trade Policy Review 
Page 62 
 
 
industry.  In addition, greater operational flexibili ties were given to locally incorporated foreign 
insurance companies;  for example, they may now  establish branches nationwide without restriction.44   
53. Since its previous Review, Malaysia has also been reforming its prudential requirements for 
insurance business.45  In particular, a risk-based capital (RBC) framework replaced a solvency regime 
from 2009.  Under the solvency regime, minimum so lvency margins were set at RM 50 million for 
direct insurance companies and lo cally incorporated professional reinsurers, and RM 10 million for 
branches of foreign professional reinsurers.  Unde r the RBC framework, an insurance company is 
required to compute its capital-adequacy ratio based  on a prescribed formula.  This company-specific 
ratio is then used by the BNM as the basis for its supervision.  Th e authorities state that a similar 
framework is being developed for takaful  operators. 
54. Other prudential requirements include minimu m paid-up capital or surplus of assets over 
liabilities of:  RM 100 million for direct insurance co mpanies (locally or foreign owned), and locally 
incorporated professional general reinsurers;  RM 50 million for locally incorporated professional life 
reinsurers;  and RM 20 million "working funds" for foreign-incorporated professional reinsurers (life 
and general).  Insurance brokers and adjusters must  maintain paid-up capital unimpaired by losses of 
RM 500,000 and RM 150,000, respectively.46 
55. In addition, premium controls remain for fi re and motor insurance business:  the minimum 
level of premiums proposed by insurers must be approved by the BNM.  As outlined in the FSMP, 
measures are to be taken to progressively deregulate the pricing of fire and motor insurance products, 
although there is no specific timetable. 
Offshore insurance 
56. Offshore insurance activities are supervised by the Labuan Offshore Financial Services 
Authority (LOFSA), and are regulated under the Offshore Insurance Act 1990.  As part of the 
liberalization programme for financial services announ ced in April 2009, qualified offshore insurance 
companies licensed by LOFSA will be allowed to  have a physical presence onshore from 2011. 
Takaful insurance 
57. In addition to conventional insu rance, Malaysia also offers takaful  insurance, or Islamic 
insurance.  Takaful  operators are regulated under the Takafu l Act 1984 and other relevant guidelines 
and circulars issued by the BNM.  Takaful  operators must obtain licences from the Ministry of 
Finance upon recommendation from the BNM.  They mu st be locally incorporated, with a minimum 
paid-up capital of RM 100 million.  In addition, they must be a member of the Malaysian Takaful 
Association. 
58. Following the liberalization measures announced in  April 2009, the foreign equity limit in a 
takaful operator was raised from 49% to 70%, and w holly foreign ownership was allowed for 
                                                      
44 They are also allowed to enter into "banca ssurance" arrangements with banking institutions. 
45 From 2009, a "launch-and-file" sy stem replaced a 30-day prior notif ication system fo r new insurance 
products from 2009.  Under the new system, insurers  meeting certain risk-man agement requirements are 
allowed to launch new insurance products immediately upon submission of required information to the BNM.  However, the 30-day prior notification requirements still  apply to products that are completely new to the 
Malaysian market, as a prudential measure. 
46 APEC online information.  Viewed at:  http ://www.apec-iap.org/docume nt/MAS_2008_IAP.htm. 
[20.03.2009]. Malaysia WT/TPR/S/225/Rev.1 
 Page 63 
 
 
retakaful  (Islamic reinsurance) operators.47  At the same time, the Government announced the 
issuance of two new family takaful  licences in 2009, to companies deemed to offer "significant value 
propositions" to the takaful  insurance sector.  Also, as for insurance companies, takaful  operators are 
allowed to link-up with commercial banks to distribute or market takaful  products under 
"bancatakaful" arrangements.   
59. To promote the development of takaful  business, full income tax exemptions are given to 
international takaful  operators:  takaful  operators offering takaful  business in international currencies, 
if they set up international currency business units (ICBU), may have full exemption in income tax for 
ten years, between 2007 and 2016. 
(d) Securities 
60. The capital market in Malaysia includes equity and bond markets.48  According to the 
authorities, Malaysia's capital market was able to withstand the global financ ial crisis due to the 
structural reforms undertaken over the last decade.49   
61. Malaysia's capital market is regulated by th e Securities Commission (SC), a statutory body 
reporting to the Minister of Finance, through the Capital Markets and Services Act 2007, the 
Securities Commission Act 1993, and the Securities Industry (Central Depository) Act 1991.  The SC 
regulates corporate bond issues and all matters relating to securities, futures contracts, and unit trust schemes.  It also regulates the listing of such secu rities on Bursa Malaysia, as well as matters relating 
to take-overs and mergers.
50  When the Capital Markets and Se rvices Act (CMSA) 2007 entered into 
force, a key measure was the introduction of a si ngle licensing regime to reduce administrative and 
compliance costs of capital market intermediaries.  Capital market intermediaries may now hold one 
capital markets and services licen ce instead of multiple licences. 
62. The development of the capital market, includi ng reform measures, was specified in various 
plans, in particular the Ten-Year Capital Market  Master Plan (CMP), aimed at building a fully 
developed capital market between 2006 and 2010.51  Under the CMP, Malaysia opened its securities 
market to foreign suppliers in 2004, when five  licences were issued to 100% foreign-owned fund 
management companies, and five to 100% forei gn-owned stock-broking companies.  Malaysia also 
removed equity restrictions on future broking, vent ure capital, and investment advisory companies.   
63. Since then, Malaysia has been encouraging fore ign investment in the securities sector.  Tax 
incentives are provided to attract forei gn issuance, listing, and investment.52  Foreign companies were 
                                                      
47 A retakaful operator may be registered either as a loca lly incorporated entity with minimum paid-up 
capital of RM 100 million, or a branch with minimum net working funds of RM 20 million. 
48 Malaysia's bond market has been developing fast:  from 1997 to 2008 it expanded four fold, and has 
become the third largest in Asia in terms of percentage to GDP.  At end 2008, corporate bonds outstanding reached RM 282.5 billion, up by 7% from 2007, and sukuk  (Islamic bonds) comprised 56% of total corporate 
bonds (up from 46% in 2005).  Foreign investment in Malaysia's bond market increased, from RM 11.6 billion 
in 2004 to RM 43.2 billion in November 2008 (Securities Commission, 2009). 
49 Securities Commission (2009). 
50 Bursa Malaysia was previously known as the Kuala Lumpur Stock Exchange.  It became a public 
listed company in 2005.   
51 Securities Commission online information, Capital Market Masterplan Malaysia .  Viewed at:  
http://www.sc.com.my/eng/html/cmp/cmpmainpage.html [24.11.2008]. 
52 Interest or profit paid to foreign investors on ringgit-denominated sukuk  or debentures (apart from 
convertible loan stock), if approved by the SC, is exempt from income tax.  In addition, profit paid to any person 
on non-ringgit denominated sukuk  (excluding convertible loan stock), if originated in Malaysia and approved by 
the SC, is also exempt from income tax. WT/TPR/S/225/Rev.1 Trade Policy Review 
Page 64 
 
 
allowed to be listed in Malaysia in 2006, and mo re liberalization measures were announced in 2008, 
to streamline the listing requirements for foreign a nd domestic companies.  The authorities consider 
that Malaysia has a competitive market for IPOs with low direct listing costs and fast regulatory 
turnaround time for approvals.53   
64. The Government adopted further liberalizati on measures in 2009:  a new framework for 
listing and equity fund-raising la unched in May, became effective on 3 August 2009.  The new 
framework is intended to make Bursa Malaysia a mo re attractive platform for Malaysian and foreign 
companies.  Bursa Malaysia's Main Board and S econd Board were merged into a single board – the 
Main Market.  The Bursa Malaysia MESDAQ (a NASDAQ-like SMEs board), was separated into an 
alternative market – the ACE Market – open to companies of all sizes and from all economic sectors.  
Foreign companies can seek primary listing on both  the Main Market and the ACE Market (although 
their secondary listing on the ACE Market is not allo wed).  In June 2009, restrictions on a company's 
share of foreign ownership were relaxed:  from 70% to 100% for fund management companies 
providing wholesale services;  and from 49% to 70% for unit trust management companies providing 
retail services, and for stock-broking companies.   
(iii) Telecommunications 
65. There has been no significant change in telecom-related legislation since the previous Review 
of Malaysia in 2006.  The main legislation on telecommunications services comprises:  the 
Communication and Multimedia Act 1998;  the Communications and Multimedia Commission Act 
1998;  and the Digital Signature Act 1997.  The sector is regulated by the Ministry of Information, 
Communication and Culture (MICC), and the Communications and the Multimedia Commission.  
66. Malaysia's fixed-line market continues to be dominated by Telekom Malaysia Berhad (TM), a 
government-linked company, accountin g for 98% of the market.  TM separated its fixed-line and 
mobile phone business into two companies in 2008 , and no longer provides mobile phone services.  
Malaysia currently has four mobile phone operators.   
67. Telecom services suppliers must obtain a licence from the Minister of Information, 
Communication and Culture;  licence conditions are th e same for local and foreign service suppliers.  
The company must be incorporated in Malaysia , with minimum paid-up capital of RM 500,000.  
Malaysia's GATS commitments specified that forei gn participation of up to 30% is allowed in 
telecommunications services, although in practice participation of up to 49% may be allowed.54   
68. Competition in telecommunications (particularly in fixed-line services) is limited.55  
However, the authorities consider that competition was introduced in the fixed-line sector in early 
1990s, when five additional licences were issued in  line with the National Telecommunication Policy 
to encourage competition. 
69. Retail prices for fixed-line services are regulated by the Government through the 
Communications and Multimedia (Rates) Rules 2002.  Under the rules, maximum prices are set, 
below which companies are free to set their tariffs;  these ceilings have not been changed since 2002.  
The tariffs for fixed-line telecom services have been declining over the past few years, particularly for 
                                                      
53 Four out of 977 companies listed on Bursa Malaysia in 2008 were foreign. 
54 Higher equity participation is allowed for "indi vidual network service provider licenses", and "class 
application service provider licenses". 
55 The efficiency of the tel ecom sector is affected by, inter alia , the equity cap on foreign investment, 
the requirement that companies must have a bumiputera  equity participation of 30%, and the uncertainty and 
lengthy procedure for obtaining a licence. Malaysia WT/TPR/S/225/Rev.1 
 Page 65 
 
 
long-distance and international calls.  Retail rat es for mobile phone services are not regulated, and 
have also been declining.  The Government re gulates access and interconnection between all service 
providers.  "Call back service" is prohibited.  On the issue of cross-subsidization, the Communications 
and Multimedia Act 1998 stated that rate setting s hould be based on costs, and cross-subsidies in 
general should be eliminated.  This principle, how ever, applies only to rates not regulated by the 
Government.  
(iv) Transport 
(a) Air transport services 
70. The aviation sector is regulated by the De partment of Civil Aviation (DCA) under the 
Ministry of Transport (MOT), in acco rdance with the Civil Aviation Act 1969.56  The MOT 
formulates plans and reviews policies relating to air services;  it intends to expand Malaysia's 
international air services network through negotiati ons, and ensures the planning, building, and 
maintenance of airports in line with specified sta ndards.  The DCA is responsible for granting licences 
to, inter alia , aviation personnel, air service providers, air port operators, and main tenance suppliers.  
Licensing requirements are based on International Civil Aviation Organization (ICAO) Annexes, the 
Civil Aviation Act 1969, and the Civil Aviation Regulations 1996.57 
71. Malaysia Airlines (MAS), a government-linked company, and AirAsia, a private company, 
are Malaysia's main carriers, accounting for 51.4% and 48.6% of total domestic air traffic volume (for 
passengers) in 2007.58  MAS and AirAsia also provide 45.3% and 16.3% of international aviation 
services in Malaysia;  the rest is provided by 76 foreign airlines.   The Government is the majority 
shareholder of MAS (69%), while foreign investor s hold 1.88%.  According to the authorities, the 
Government does not provide any privileges to the MAS, such as subsidies, government guarantees, 
exclusive route access, ground handling monopoly or captiv e markets.  It is not clear whether civil 
servants travelling by air must use MAS. 
72. As in many other services sectors, the Govern ment has been adopting measures to liberalize 
the civil aviation industry.  On 30 June 2009, th e Government announced the deregulation of the FIC 
guidelines;  limitations on foreign equity will now  be decided by the regulator of the industry.59 
73. International civil aviation is governed by bilate ral air services agreements (ASAs);  Malaysia 
has signed bilateral ASAs with 86 partners.60  Based on the traffic rights specified in the respective 
ASA, airlines decide their own capacity (frequency a nd aircraft type), subject to approval by the 
authorities.61  Fares for international routes are also set  in accordance with the bilateral ASAs.  
Depending on the ASA, fares may need to be appr oved by either government (single approval) or 
both governments (double approval).  Most of Mala ysia's ASAs are moving towards dual disapproval, 
                                                      
56 Other legislation for the sector includes:  Carriage by Air Act 1974, Civil Aviation Offences Act 
1984, Airport and Aviation Services (Operating Company) Act 1991, International Interest in Mobile 
Equipment (Aircraft) Act 2006, and Civil Aviation Regulations 1996. 
57 The authorities state that the MOT and DCA try to en sure that all existing rules and regulations in air 
transport are implemented in accord ance with the ICAO guidelines. 
58 Air transport services for passenge rs are provided by six Malaysia n carriers:  Malaysia Airlines 
(MAS), AirAsia, AirAsia X, FireFly, Berjaya Air, and MASWings. 
59 Previously, maximum foreign ownership of domestic airline companies was set at 30%. 
60 Ministry of Transport online information.  Viewed at:  http://www.mot.gov.my/index.php?option= 
com_content&task=view&id=236&Itemid=137 [25.11.2008]. 
61 Code sharing and other commercial  arrangements are also set between airlines under bilateral ASAs;  
some ASAs do not require approval from the authorities.   Malaysia's MOT is in charge of approving these 
arrangements for both domestic and international aviation.   WT/TPR/S/225/Rev.1 Trade Policy Review 
Page 66 
 
 
whereby fares are effective unless both governments di sapprove.  Fares for domestic routes are set by 
airline companies;  the Ministry will only interven e if the fares are considered predatory to other 
airlines operating the same route. 
74. Malaysia has seven international airports.62  Airport access and related services, as well as 
facilities are regulated by MOT and the DCA.  Sl ot coordination is managed by a joint committee 
headed by MAS and comprising national airlines, the DCA, ground handlers, and the airport operator.  
Malaysia's airport charges are among the cheapest in the region (Table AIV.5).  The authorities state 
that the Government provides no subsidies for air port charges;  they are regulated by the Civil 
Aviation Regulations 1996, and any increase mu st be approved by the Government.   
75. Aircraft repair and maintenance services are provided by authorized MRO companies 
(maintenance, repair, and overhaul).  There are no re strictions on the sale or marketing of air transport 
services and use of computer reservation systems in the aviation industry. 
(b) Maritime transport 
76. The authorities consider maritime transport to  be a strategic sector;  more than 90% of 
Malaysia's international trade is transported by sea.  Maritime transport grew steadily during the 
period under review, although there was a downtur n in terms of total cargo handled in 2008. 
77. The Ministry of Transport, through its Mariti me Division, is in charge of the overall 
development of the maritime sector, including the formulation of policies.  The Marine Department 
under the MOT is responsible for enforcing rules a nd regulations relating to the standards and safety 
of ships.63 
78. Malaysia has only one government-linked shi pping company, the Malaysian International 
Shipping Corporation (MISC);  65% of MISC's shares are held by PETRONAS, 8.92% by the 
Employees Provident Fund, and  3.29% by  state governments.  The MISC accounted for 12% of 
Malaysia's total seaborne trade;  the combined share of all domestic shipping lines was 17%.  The 
authorities consider that this small proportion is be cause maritime transport in Malaysia is open to 
international competition.  Apart from cabotage, trad ers are free to choose domestic or international 
shipping lines. 
79. With a view to, inter alia , reducing freight payments to non-national shipping lines, the 
Government has been emphasizing greater self-suf ficiency in shipping services.  Tax incentives, 
mainly in the form of tax exemptions on income derived from international shipping operations, are 
granted to Malaysian-flagged vessels.64  Persons working on Malaysian-flagged vessels are also 
exempted from income tax.65  Accelerated depreciation on ships is allowed with an annual capital 
allowance of 20%.  The Industrial Development Bank (IDB) provides loans at lower interest rates to 
owners, builders, and repairers of ships in Malaysia, although some shipowners argue that the higher 
cost of local construction largely negates the interest rate benefit.   
                                                      
62 Kuala Lumpur International Airport (KLIA), Penang, Langkawi, Johor, Subang, Kota Kinabalu, and 
Kuching. 
63 It appears the Ministry does not require notification of international liner conferences contracts. 
64 Under the Merchant Shipping Ordinance 1952, a vessel must have at least 51% Malaysia equity to 
fly the national flag.  The Merchant Shipping Amendment Act 1997 further requires that, for a ship to fly the 
national flag:  the vessel owner must be incorporated in and have an office in Malaysia;  the ship manager must be a Malaysian citizen or corporation;  the company must  have paid-up share capital of 10% of the value of the 
ship, or RM 1 million, whichever is higher;  and tankers or bulk ships must be less than 15 years old, and other 
ships less than 20 years old. 
65 Aviation enterprises and their employees do not benefit from similar income tax exemptions. Malaysia WT/TPR/S/225/Rev.1 
 Page 67 
 
 
80. Malaysia has been liberalizing its maritime sector ;  as of April 2009, 100% foreign equity is 
allowed in some maritime services.66  Otherwise, maximum foreign ownership is 70% in Malaysian 
shipping companies, and 49% in ports.  The Govern ment also adopted measures to partially liberalize 
cabotage;  previously, domestic routes were r eserved for Malaysian registered vessels, although 
foreign-flagged vessels were allowed to tranship c ontainers between the Malaysian ports of Penang 
and Port Klang, and between Pe nang, Johor, and Port Klang wit hout obtaining domestic shipping 
licence.  As of 3 June 2009, the Government allo ws foreign-flagged vessels to tranship containers 
between the ports of Sepangar, Bintulu, and Kuching,  and the ports of Klang and Tanjung Pelepas.    
81. To date, Malaysia has signed bilateral shi pping arrangements with 12 countries, and has 
ratified 18 international conventions.  
(v) Tourism 
82. Malaysia's tourism sector continues to be a signi ficant source of export earnings.  It is one of 
the promoted services sectors under the Third Industr ial Master Plan 2006-2020.  In particular, the 
National Tourism Policy (2004-10) aims to develop the tourism industry into one of the country's 
main sources of income.67  
83. The Ministry of Tourism is the main policy fo rmulating and implementing agency for overall 
development of the sector.  Tourism Malaysia, a st atutory body under the Ministry of Tourism, is 
responsible for promoting tourism and making Mala ysia an outstanding tourist destination.  The 
Tourism Industry Act 1992 (amended in 1998) provid es for the licensing and regulation of tourism 
enterprises.  Under the Act, tour operators, travel agencies, and tourism training tutors must obtain licences from the Ministry of Tourism.  Hotels a nd restaurants are licensed by local authorities.  
Licensing requirements are the same for domestic and foreign applicants. 
84. Malaysia has been adopting measures to further promote the tourism industry, inter alia , by 
removing or reducing foreign equity restrictions, providing tax incentives, and offering loans at low 
interest rates.  From April 2009, 100% foreign e quity is allowed in:  theme parks, convention and 
exhibition centres (seating capacity above 5,000);  tr avel agencies and tour operators (for inbound 
travel only);  and hotel and restaurant services (fo r 4 and 5 star hotels).  Tax incentives have been 
granted to enterprises engaged in "priority sectors" , including hotel accommodation and other tourist 
projects, and the development of "wellness" zones in Port Dickson, Negery Sembilan.
68   
(vi) Professional services 
85. Malaysia's professional services sector, as one of the sectors identified for further growth in 
the IMP3, has been relatively clo sed to foreign competition by comparison with other sectors of the 
economy.  The Government has been reviewing the domestic laws and regulati ons in an effort to 
further liberalize this sector.  The ASEAN Free Tr ade Area offers more market openings within the 
region, enabling Malaysian professionals to be mo re involved in professional services in neighbouring 
                                                      
66 In particular, 100% foreign equity is allowed in:  class C freight transportation (for private carrier 
licence to transport own goods), ma ritime agency services, and vesse l salvage and refloating services. 
67 In 2008, international tourist arrivals grew by 5.1% to 22.05 million, surpassing the target of 
21.5 million specified under the NTP.  In terms of to urism receipts, Malaysia r eceived RM 49.6 billion, an 
increase of 7.6% from 2007.  Tourism revenue accounted for 6.7% of GDP in 2008.   
68 Ministry of Tourism online information.  Vi ewed at:  http://www.motour.gov.my/index.php/ 
english/tax.html [01.12.2008].  The development of wellness zones are to fulfil the Government's plan to make 
Malaysia a health centre in the region;  the incentives ar e provided to attract more operators and investors from 
the medical and health industry. WT/TPR/S/225/Rev.1 Trade Policy Review 
Page 68 
 
 
countries.  A number of MRAs have been signed to  facilitate the freer mobility of professional service 
providers within the region.69 
(a) Legal services 
86. Malaysia is currently undertaking a study of  its legal services framework with a view to 
further liberalizing the sector.  Th e practice of Malaysian law is restricted to Malaysian citizens or 
permanent residents who have served an apprenticesh ip with a Malaysian lawyer, are competent in 
Bahasa Malaysia (an official langua ge), and have been admitted to the Malaysian Bar pursuant to the 
Legal Professional Act 1976.  Under Malaysia's GATS commitments, foreign lawyers can practise in 
Malaysia only through a corporation incorporated in Labuan, and are restricted to advisory and 
consultancy services relating to home country laws, international law, and offshore corporation laws 
of Malaysia.70  No "GATS plus" commitment in legal servi ces has been made in Malaysia's bilateral 
and regional FTAs. 
87. Under exceptional circumstances, a foreign lawyer may apply for a special admission 
certificate from the Attorney General.  The certific ate, approved on a case-by-case basis, allows the 
foreign lawyer to practise as a solicitor in Peninsul ar Malaysia for a specified duration, subject to 
periodic renewal.  No such certificates have been issued.   
(b) Accounting and taxation services 
88. Accounting services in Malaysia are regulated by the Malaysian Institute of Accountants 
(MIA), under the Ministry of Finance;  it reports  to the Accountant General Office.  Accountants, 
local or foreign, wishing to provide auditing and ta xation services in Malaysia must first register with 
the MIA.  Foreign accountants need to have  an address in Malaysia, as well as recognized 
qualifications.  Once registered, the accountant must  apply for a Practicing Certificate from the MIA 
to set up a public practice, before applying for a licence  from the Ministry of Finance for certain types 
of services such as audit, liquidation, and tax.   
89. Under Malaysia's GATS commitments, forei gn accounting firms may provide accounting and 
taxation services in Malaysia, but only through a locally registered  partnership with Malaysian 
accountants or Malaysian accounting firms, and th e aggregate foreign shares must not exceed 30%.71  
There have been no changes to foreign participati on restrictions during the review period, although 
the Government is considering increasing forei gn equity participation in accounting and taxation 
services under the Doha Round negotiations.  Two MR As on accounting qualifications have entered 
into effect  since 2006:  between MIA and the Indonesia Institute of Accountants (in 2006), and 
between MIA and the Chartered Practising Accountan ts of Australia (in 2007).  The MRAs allowed 
more mobility between accountants from the signatory  countries, although registration or membership 
with the home body is still required, and applican ts must demonstrate their competency in the 
business and taxation laws of the host countries.  
(c) Engineering services 
90. Under the Registration of Engineers Act 1967, th e Board of Engineers is the only regulator 
for engineering services in Malaysia.  Foreign engine ering firms must form joint ventures in a specific 
                                                      
69 ASEAN MRAs on Engineering Services (sig ned on 9 December 2005), on Nursing Services 
(8 December 2006), and on Archit ectural Services (19 November 2007), on Medical Practitioners 
(25 August 2008), and on Dental Practitioners (25 Augu st 2008);  and ASEAN Framework MRAs on Surveying 
Qualifications (19 November 2007), and on Accounting Services (25 August 2008). 
70 WTO document GATS/SC/52, 15 April 1994. 
71 WTO document GATS/SC/52, 15 April 1994. Malaysia WT/TPR/S/225/Rev.1 
 Page 69 
 
 
project, and obtain approval from the Board, before th ey can operate in Malaysia.  Up to 30% foreign 
equity is allowed in a company providing multi-di sciplinary practices.  Only foreign professionals 
participating as temporary engineers are allowed on a job-to-job basis. 
(d) Architectural services 
91. Architectural services are regulated by the Arch itects Act 1967, and the Board of Architects is 
the only regulating body.  The Board has been part icipating in ASEAN and APEC with a view to 
realizing freer movement of architectural service providers within the region.  Foreign architects may be temporarily registered to practise in Malaysia if  they are consultants to a project wholly financed 
by the foreign government or implemented under a bilateral arrangement between governments.  
Foreign architects may hold up to 30% shares in a multi-disciplinary consultancy firm providing architectural, engineering, and/or quantity survey ing services in Malaysia.  Foreign architects and 
foreign architectural firms have been providing d esign services in Malaysia;  they are required to 
collaborate through joint ventures with Malaysian architects. 
(vii) Distribution services 
92. The Ministry of Domestic Trade, Co-ope ratives and Consumerism (MDTCC) regulates 
distribution services in Malaysia.  Its Committee on  Distributive Trade considers applications from 
foreigners intending to undertak e distribution services in Malaysia.
72  All applications involving 
foreign investment, including opening of new branches, relocation, expansion of existing 
branches/outlets, and buying over/taking over of outlet s of other operators, require approval from the 
Committee on Distributive Trade.  All applicants  must also obtain approval from the Committee 
before purchasing any land, premises or assets to operate distribution services.   
93. Companies must be locally incorporat ed, with 30% of equity reserved for bumiputera .  
Minimum capital investment requirements vary according to the type of distribution service:  i.e. RM 50 million for hypermarkets, RM 20 million for department stores, RM 25 million for superstores, RM 5 million for direct selling, and RM 1 million for each specialty outlet.
73 
94. An equity restriction of 30% applies to foreign investors in direct selling business.74  
Department stores, supermarkets, and shopping malls must reserve 30% of the shelf space for 
products made by Malaysian SMEs.  These restrictions  and reservations are cu rrently under review by 
the Government. 
                                                      
72 The Committee comprises members from regulatory agencies such as the ministries of Finance, 
International Trade and Industry, Home Affairs, Housing and Local Government, Agriculture and Agro Based 
Industry, Rural and Regional Development, the Economic Planning Unit, and the Federal Territory Ministry.  
The MDTCC serves as the se cretariat to the Committee. 
73 APEC online information.  Viewed at:  http ://www.apec-iap.org/docume nt/MAS_2008_IAP.htm. 
[20.03.2009]. 
74 Pyramid selling is prohibited;  only single-leve l marketing, multilevel marketing, and mail order are 
permitted.   Malaysia WT/TPR/S/225/Rev.1 
 Page 71 
 
 
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