THE recent Budget 2020 proposal tabled by Finance Minister Lim Guan Eng is the second of its own after the formation of the Pakatan Harapan (PH) government in May 2018.

Unlike last year’s Budget 2019 proposal, the latest Budget sets the stage for the implementation of the PH government’s Shared Prosperity Vision (SPV) 2030 in the coming years.

While discussions have focused on the shared prosperity needs as one of the important gists of the Budget, fewer conversations have been devoted on how foreign investors can benefit from it.

There are seven key takeaways for foreign investors seeking to invest in Malaysia or those planning for their expansions.

First, Chinese investors now have a ‘special channel’ that caters to their investment needs in Malaysia.

Parked under InvestKL, this one-stop channel will allow aspiring Chinese investors to seek assistance and information without going through different government agencies to get their investments approved.

With the establishment of the ‘special channel’, Putrajaya aims to double the Chinese foreign direct investments (FDIs), up from the 2008 figure of RM4.4 billion.

As stated in his Budget speech, Lim is setting his sight of putting the Chinese FDI level on par with China’s status as Malaysia’s largest trading partner in coming years.

Second, the Malaysian government also recognises the increase of FDIs from other countries and especially from the US, which is now the largest FDI source for Malaysia.

In overcoming the delays that consistently occur in the approval process of foreign investments, both the Finance Ministry and the Ministry of Trade and Industry (MITI) co-operated at high level, forming the National Committee on Investment I (NCII) in September.

As revealed by Deputy Trade Minister Ong Kian Ming instead of taking three months for the approval process, it takes a month now to get foreign investment applications approved by the NCII.

Also equipped with the authority to approve incentives to the foreign investors immediately, the NCII will provide high certainty to foreign investors, especially from existing American companies seeking expansions locally and new electrical and electronic (E&E) players planning to invest in Malaysia.

Third, the Budget also allocated RM1 billion to attract targeted Global Fortune 500 companies and global unicorns in high technology, manufacturing, creative and new economic sectors.

Given in the forms of customised packaged investment incentives over the period of five years, these companies are to enjoy such incentives provided they invest at least RM5 billion in Malaysia and proving that they are able to expand in their businesses as well as export their products globally.

The investment proofs that can be taken into account to qualify for such incentive packages, include generating high quality jobs, supporting Malaysian small and medium enterprises (SMEs) and consolidating local’s manufacturing and service ecosystems over the five-year period.

Fourth, the whole incentive framework will be reformed in order to provide foreign investors a comprehensive ecosystem of investment incentives.

Among all, the reforms include amending the current Promotion of Investments Act 1986 as well as adjusting Special Incentive Package and Incentives under the Income Tax Act 1967.

Anticipated for January 2021, foreign investors are expected to enjoy an array of investment incentives once the full incentive framework is being rolled out by the Malaysian government next year.

Fifth, RM10 million has also been given to MITI for its post-approval investment monitoring and realisation of foreign investments.

This is an important move from Putrajaya in ensuring that approved foreign investments will take off in the country and not lost in the middle of bureaucratic or market impediments.

With the allocation given in the Budget, MITI can also perform extensive monitoring of foreign investments, especially in servicing the post-approval needs of foreign investors and making sure that the approved investments will bring trickle-down effects to average Malaysians and local SMEs.

Sixth, new tax incentives will be given to targeted E&E industry in Malaysia.

In encouraging industrial players to engage in more high value-added activities, up to 10 years of income tax exemption will be given to these companies investing in selected knowledge-based services, on top of Special Investment Tax Allowance provided to those E&E companies that have exhausted the Reinvestment Allowance, to reinvest locally.

With these new tax incentives in place, foreign investors who made up a substantial portion of the E&E players in Malaysia, are encouraged to take up these incentives and help Malaysia to transit into Industry 4.0 economy.

Finally, allocation of tax incentives has been granted to any company that is seeking automation as a means to increase its productivity.

In the manufacturing sector, companies seeking automation can enjoy the existing capital allowance – Accelerated Capital Allowance (Automation Equipment) for the first RM2 million and RM4 million incurred on qualifying capital expenditure for individual companies, which has now been extended well into 2023.

Apart from that, such capital allowance is also applied into the services sector for the first time.

In order to promote automation in the services sector for the next three years, such capital allowance is now applicable to the companies which incurred RM2 million for their first qualifying capital expenditure.

Despite such incentive is applicable for both domestic and foreign companies, the latter can readily utilise such opportunity to automate its production line and delivery of services in tandem with their productivity goals.

Overall, the Budget’s announcement of these seven major incentives sent an important message to foreign investors that Malaysia is seeking to capitalise on the shift of global supply chain investments (due to US-China trade war) for its own economic interests.

Also, it echoed the previous policies as unveiled by Industry4WRD Policy and SPV 2030 documents earlier, that places the attraction of high value-added investments into Malaysia in the following years.

As for foreign investors, these policies are the seven key takeaways that should be utilised for their business presence and expansions in Malaysia.

* Anbound Malaysia is part of Anbound China, a think tank based in Beijing.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.