WORLD TRADE  
ORGANIZATION  G/SCM/Q2/MYS/13 
13 September 2010 
 (10-4622) 
Committee on Subsidies and  
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies to Questions Posed by the UNITED STATES1 Regarding the  
New and Full Notification of MALAYSIA2 
 
  The following communication, dated 7 September 2010, is being circulated at the request of the Delegation of Malaysia.  
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I. GENERAL COMMENTS 
 The Report by the Secretariat for the la test Trade Policy Review of Malaysia 
(WT/TPR/S/225, 14 December 2009), at Section II, page 15, para. 16, notes that Malaysia has 
stated that it makes regular notifications to the WTO.  However, prior to the current subsidy 
notification, which covers the years 2007-2009, Mal aysia had not made a subsidy notification as 
required by Article 25 of the SCM Agreement since 1996 (G/SCM/W/546, 28 April 2009).  Therefore, to date, Malaysia has not submi tted a subsidy notification covering the 
years 1996-2006.   
 
Question   a. Does Malaysia intend to provide a subsidy notification for the years 1996-2006?  
If not, please explain how Malaysia view s its subsidy obligations under Article 25 
of the Subsidies Agreement?   
 
Reply
 
  Malaysia has no intention of submitting notification for the period 1996-2006 as the 
notification made for the period of 2007-2009 c overs existing programmes to date, including 
programmes introduced prior to 2007.  Malaysia is  committed to fulfill its obligations under all WTO 
Agreements, including the Agreement on Subsid ies and Countervailing Measures (ASCM) and has 
taken measures to ensure our notification obligations are met. 
 
Question 
 
 b. What steps has Malaysia taken to en sure that it will provide timely subsidy 
notifications in the future?   
 
                                                     
 
1 G/SCM/Q2/MYS/12. 
2 G/SCM/N/186/MYS. G/SCM/Q2/MYS/13 
Page 2  
 
  Reply
 
  Malaysia has taken efforts to ensure subs idies are notified in a timely manner through 
intensified consultations and clo ser engagement with relevant Ministries/Agencies.  Malaysia will 
ensure that future notificati ons will be done accordingly. 
 
II. CURRENT NOTIFICATION QUESTIONS 
 The United States submits the following questions on the programs that Malaysia 
included in its current notification.    1. SMIDEC Programs (Matching Grant for SM Es & Grant for Enhancing Marketing 
Skills of SMEs) 
Question 
 
a. Please explain to what "SMIDEC" refers.   
 
Reply
 
 
 Now re-branded as Small and Medium Enterprises Corporation Malaysia (SME Corp.), it is a 
government dedicated agency to formulate overa ll policies and strategies for small and medium 
enterprises (SMEs) and to coordinate programmes acr oss all related Ministries and Agencies.  It is 
also a central point of reference for informati on and advisory services for all SMEs in Malaysia. 
 
Question 
 
 b. Please explain how "small medium enterprises" is defined under this 
programme.   
 
Reply  
 
 Small and Medium Enterprises in Malaysia are categorized as follows:  
MICRO 
 
Sales turnover of less than RM250,000 
OR 5 or less full time employees  
 
SMALL  
Sales turnover between RM250,000 and less than RM10 million 
OR between 5 and 50 full time employees  
 
MEDIUM  
Sales turnover between RM10 million and RM25 million 
 OR between 51 and 150 full time employees. 
 2. MIDA Programmes (Pioneer Status & Investment Tax Allowance) 
Question 
 
a. Please explain to what "MIDA" refers.  G/SCM/Q2/MYS/13 
 Page 3 
 
 
  Reply  
  The Malaysian Industrial Development Author ity (MIDA) is a Government agency under the 
Ministry of International Trade and Industry (MIT I) responsible for the promotion and facilitation of 
foreign and domestic investment in the manufacturi ng and services sectors.  Its functions include the 
evaluation of projects for approval for Manufacturing Licence and investment incentives. 
 
Question   b. Please identify which "approved promot ed products/activities" and "approved 
sectors" are eligible for incenti ves under these programmes.   
 
Reply
 
  The list of promoted products/activities and se ctors is published by Statutory Order in the 
Malaysian Government gazette from time to time.  The promoted pr oducts/activities are also available 
in the MIDA website at www.mida.gov.my
. 
 
Question   c. How is it determined whether a partic ular promoted product, activity or sector 
"contributes to the future growth and development of the economy".   
 
Reply
 
  The promoted products, activities or sectors are determined based on Malaysia's macro 
economic development objectives as reflected in the Industria l Master Plans and five-year 
development plans.  This includes moving to wards higher value-added/technology intensive 
industries, enhancing/diversifying the sectors in order to further improve the competitiveness of the 
economy and to achieve great er regional integration. 
 
Question 
 
 d. For the Pioneer Status programme, pl ease explain what criteria are used for 
determining the extent of the income tax exemption ( e.g., whether it is a partial 
or full exemption) for a particular beneficiary.   
 Reply
 
  The criteria used to determine the extent of  income tax exemption generally would include 
the level of value-added, technology used, level of managerial, technical and supervisory personnel 
engaged vis-a-vis  total employment, location of projects, and whether the project is of strategic 
importance to Malaysia.   Question   e. For the Investment Tax Allowance, please explain what types of capital 
expenditures qualify for the allowance.   
 G/SCM/Q2/MYS/13 
Page 4  
 
  Reply
 
  The qualifying capital expenditures for the Investment Tax Allowance are capital 
expenditures incurred on industrial building, plant and machinery directly used for the purpose of the promoted activities or the production of the promoted products. 
 
III. OUTSTANDING ARTICLE 25.8 QUESTIONS 
 Additionally, the United States previously submitted questions pursuant to Article 25.8 
of the Subsidies Agreement regarding certain meas ures maintained by Malaysia, some of which 
appear to be prohibited subsidies and which a re not addressed in Malaysia's current "new and 
full" subsidies notification.  See, G/SCM/Q2/MYS/10 (10 October 2006).  These measures, which 
are described in more detail in the cited document, are as follows:   
 Question  
 a. Single or Double Deduction for the Promotion of Exports  
Reply
 
  See, G/SCM/N/2/MYS (27 April 1995), the in centives provided are export consistent with 
Article 3 of the ASCM.  The programme is applicab le to all trading and manufacturing companies for 
the purposes of promotional activities. 
 
Question   b. Local Content Requirement Attached to Incentives under the Pioneer Status and 
Investment Tax Allowance Programmes 
 
Reply
 
  Malaysia has phased-out local content require ments attached to incentives under the Pioneer 
Status and Investment Tax Allowance Programme in accordance with Malaysia's commitment under 
the SCM Agreement. 
 
Question  
  c. Income Tax Exemption Based on the Value of Increased Exports 
 
Reply
 
  This scheme is intended for value added activiti es which applies to both foreign and domestic 
traders/manufacturers.  It is a measure to attract investment and does not pr omote export, neither does 
it require local content.  Question   d. National Automotive Policy (NAP) Framework Incentives 
 Reply
 
  All incentives under the NAP is availa ble on MITI's website:  www.miti.gov.my
 
  G/SCM/Q2/MYS/13 
 Page 5 
 
 
   The objective of the Industrial Adjustment Fund (IAF) is to improve competitiveness of parts 
and component manufacturers and to enhance their contribution to automotive industry and economy.  
All companies either local, foreign or joint ventur es are eligible to apply for IAF based on two main 
criteria i.e. scale and industry linkages. 
 Tax rebate under the IAF is available to all co mpanies.  Local, foreign or joint ventures are 
eligible to apply for IAF based on two main criteria i.e. scale and industry linkages. 
 
Question   e. Industrial Linkage Programme (I LP) / Vendor Development Programme 
 
Reply
 
  The industrial Linkage Programme is a progra mme introduced by SME Corp. to assist SMEs 
to be suppliers to large scale industries (LSIs) or multi-national corporations (MNCs).  Under this 
programme, potential SMEs are evaluated based on th eir capacity and capability and if suitable, will 
be introduced to prospecting LSIs/MNCs to beco me suppliers of parts and components that are 
utilised in the production or manufacture of finished products.     Appointment of the SMEs is purely on merits  and SME Corp. does not force the LSIs/MNCs 
to accept or appoint any of the SMEs introduced.  The programme provides captive market for SMEs 
while at the same time facilitate LSIs/ MNCs to outsource their requirements. 
 
Question   f. National Biotechnology Policy Tax Incentives 
 
Reply
 
  All approved biotechnology companies are awar ded with the BioNexus status.  BiotechCorp 
is a one-stop-centre to provide assistance and guidance to all BioNexus status companies that wish to 
enjoy the tax incentives.  
 
 The objective of this policy is to encourage i nvestments in the area of Agriculture, Healthcare 
and Industrial Biotechnology under the National Biotechnology Policy that can contribute to the future growth and developmen t of the Malaysian economy. 
 
Question 
  g. Import Duty and Sales Tax Ex emptions for Spares and Consumables 
 
Reply
 
 
 Import duty and sales tax exemptions on spar es and consumables are given to companies 
carrying out manufacturing and manufacturing-related services activities, provided that the spares and consumables are basic items directly used in the production and not locally available.  There is no 
export condition for companies to be eligible for the exemption. 
 
Question 
  h. Market Development Grants 
 G/SCM/Q2/MYS/13 
Page 6  
 
  Reply
 
  The programme is applicable to all Malaysia n SMEs involved in trading as capacity building 
to cater for those seeking new opportunities in overseas market.  This is to only encourage 
promotional activities and does not guarantee the export of products. 
Question 
 
 i. Brand Promotion Grants 
 
Reply
 
 
 Brand promotion grant has been terminated since October 2009. 
 
Question 
 
 j. Tax Exemption for Malaysia Int ernational Trading Companies (MITCs) 
 
Reply  
  The programme is applicable to all trading companies trading to cater for those seeking new opportunities in overseas market.  This is to onl y encourage promotional activities and does not 
guarantee the export of products. 
 
Question 
 
 k. Free Industrial Zone Duty Exem ption for Machinery and Equipment 
 
Reply
 
  No import duties are being imposed on machineries and equipment (M&E) imported directly for the manufacturing process into FIZs by the comp anies.  Consideration for import duties exemption 
may also be given if the M&E are not available locally. 
 
 Companies located in FIZs are required to pay the applicable duties when selling products 
into the domestic market  
Question 
 
 l. Added Incentives for Reinvestme nt in Resource-Based Industries 
 
Reply
 
  Existing companies reinvesting in the r esource-based industries, namely wood-based, 
rubber-based and palm-oil based industries are elig ible for Pioneer Status or Investment Tax 
Allowance (ITA) incentives.  Th ese incentives are not contingent upon the level of exports. 
 
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