Kuala Lumpur: Malaysia has announced tax cuts and other measures to attract foreign investors to develop a massive project in southern Johor state into a major regional financial hub.
Prime Minister Abdullah Ahmad Badawi said qualifying companies in the new growth area will be exempt from foreign investment rules and will be free to source capital globally.
They will also enjoy unrestricted employment of foreign employees within the Iskandar Development Region (IDR), the area in Johor targeted for the development of a regional centre, which could match those in Hong Kong.
“With the growth of other commercial hubs around the world, competition for global investment will become increasingly intense,” Abdullah said at an investment conference on 21 March, 2007.
Malaysia, Southeast Asia’s third largest economy, saw foreign direct investment in 2005 falling to $4.3 bn from $17.6 bn in 2004. It is aiming to attract $13.6 bn to the IDR in the next five years and $105 bn in investment, spread over 20 years.
Foreign investment rules include provisions that favour the nation’s indigenous groups. Majority ethnic Malays will be relaxed in the IDR. Foreign investment Committee (FIC) conditions are not necessary in defined areas of certain activities.
Prospective investors have lapped up this offer and have said that the relaxation will be a good way to attract foreign investments. Fiscal incentives for six key sectors, namely, creative industries, educational services, financial advisory, healthcare, logistics and tourism will boost the economy in a big way.
Investors in these areas will enjoy exemptions from corporate income tax and will be able to withhold tax on certain payments for 10 years upon starting their businesses. This would also boost Malaysia’s flagging property sector, especially in the wake of the abolishing of property gains tax from April 1.