Chuping Valley Development Plan
There is no common understanding of the definition of “Green”
around the globe. The list of criteria proposed for Lembah
Chuping is the result of an analysis of the various definitions of
“Green”, “Green jobs” and “Green, sustainable economy” as
used by the United Nations Environment Programme (2008)4
and in the European Commission’s report ‘Exploiting the
employment potential of green growth’ (2012)5. In addition, the
indicators as presented in environmental and sustainability
reports published by various companies are taken into
consideration when compiling the criteria.6
To be classified as a “green manufacturer” in Lembah
Chuping, we propose a list of five (5) criteria:
Reducing energy consumption and/or potentially
making use of clean energy sources (such as solar
energy) as alternative sources of power
Potential investors in Lembah Chuping should be focused
on using clean, renewable and environmental friendly
energy sources to power their production process. The
company should have policies in place to reduce the
energy consumption in their offices and to make the
employees aware of the benefits thereof for the
environment (and the cost-savings aspect) of reducing the
energy consumption in their daily life and in the office.
Reducing the amount of materials used and/or making
use of environmental-friendly commodities and
recycled materials
Reducing the amount of materials and commodities used in
the production process impacts the whole supply chain.
Not only has it a positive effect on the exhaustion of
resources, but it also lowers carbon emissions due to less
transportation, etc. In addition, potential investors in
Lembah Chuping should encourage their employees to
make use of environmental-friendly materials and recycled
materials to decrease their impact on the environment.
Reducing water consumption
Clean water is a scare resource. Potential investors in
Lembah Chuping should be aware of this and actively
reduce their water consumption in their production process.
Companies can also be water-conscious by, for example,
using rain water in the production process, conserve and
protect water resources through efficiency, reuse water,
etc.
4 UNEP, Green Jobs: Towards decent work in a sustainable, low-carbon world (2008)
http://www.unep.org/PDF/UNEPGreenjobs_report08.pdf
5 European Commission, Exploiting the employment potential of green growth (2012),
http://ec.europa.eu/social/BlobServlet?docId=7621&langId=en
6 Refer, for example, to the Environmental Reporting Guidelines as published by the Department for
Environment, Food & Rural Affairs of the UK Government (2013),
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206392/pb13944-env-
reporting-guidance.pdf
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Chuping Valley Development Plan
Minimising or altogether avoiding the generation of all
forms of waste and pollution and/or have waste
recycling policies in place
Production companies produce waste during their
operations. Potential investors in Lembah Chuping should
avoid the generation of waste or have policies in place to
reduce the generation of waste during the production
process. Moreover, the potential investors should have
policies in place to reduce pollution in order to protect the
environment.
Helping to protect biodiversity and supporting natural
ecosystems by e.g. considering the environment in the
decision-making process (environmental
sustainability)
Potential investors should balance the economic and
environmental impact of their decisions. In addition, they
should present themselves as having “green” as one of
their core values, as main focus point or as part of their
mission, vision and/or strategy. Being green and care for
the biodiversity should be at the heart of the organisation
and in the mind of the employees.
The more the company meets these criteria listed, the
more likely it can be considered a potential, green investor
for Lembah Chuping.
Screening Potential Investors & Maintenance of the Green
Theme
Companies not only need to be Green, i.e. have
environmentally friendly operations, when they enter Lembah
Chuping to set up their businesses, they are expected, as a
minimum, to continuously maintain these Green practices
throughout their operations. To maintain this Green theme,
Lembah Chuping will need to have a set of criteria for selecting
the appropriate types of investors in accordance with the said
criteria while also implementing procedures and policies to
ensure that these Green practices are maintained; periodically
monitored consistently and upgraded when necessary. A
further elaboration of the underlying principles for investor
screening and maintenance procedures for each of the key
Green criteria are outlined below:
i) Water Consumption and Discharge
a) Screening Criteria
Due to the location of Lembah Chuping as a
water catchment area, the primary concern is
for all businesses not discharge waste water
especially those with toxic substances in a
manner which will have the potential to
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Chuping Valley Development Plan
contaminate the water quality of the nearby
Timah Tasoh dam. The standards issued by the
United States Environment Protection Agency
(“US EPA”) on Pollution Prevention & Control
and the European Environment Agency (“EEA”)
on Water Pollution are relevant guidelines for
reference by the park’s management and
businesses for managing this important need.
Preserving the quality of and reducing the
demand stress on the Timah Tasoh dam’s
water is important because it is a significant
source of water to residents and businesses
near and far. Therefore, it is important for
investors to provide the park’s management
with a report on the nature of the waste water
that would be generated by their operations and
how this would be treated so as to not pollute
the dam’s water, and substantiated track
records of their efforts to conserve water usage
during the past 3-5 years. The park
management will have to assess, with the
assistance of an independent environmental
auditor if needed, the nature of waste water
produced and the matter of water efficiency of
the investors’ operations.
b) Maintenance Procedures
The park’s management will continuously
monitor the water consumption and waste water
discharge of potential investors on a regular
basis. The process needs to be transparent and
be undertaken in an objective manner. In
addition, the park management will retain the
right to control the pricing of water supplied to
the consumers within the part as pricing is a
way to control water consumption in a manner
to prevent wastage. However, pricing will also
be subject to the availability of water supply and
the level demand at various points in time. The
standards for the reduction of water
consumption will also be reviewed and
tightened periodically by the park management.
Furthermore, park management will
continuously monitor the amount and type of
water discharged, in addition to the types of
water treatment standards/procedures
implemented by the respective businesses.
Periodic monitoring of the abovementioned
factors will help to ensure more efficient
consumption and reduce the likelihood of toxic
discharge.
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Chuping Valley Development Plan
ii) Waste Generation and Management
a) Screening Criteria
The park management is recommended to
adopt prevailing good practices in regard to
‘Waste Generation and Management’ to focus
on the opportunities for recycling, and effective
waste management. Potential investors should
have a track record of recycling efforts reflected
in their manufacturing / production processes,
and also a track record of clear and definitive
means of waste management. With regards to
waste generation and storage, businesses
should not be allowed to store, for more than 7
days, hazardous wastes in Lembah Chuping
which have the potential to contaminate the
nearby dam. In the event that such wastes are
generated, investors will be required to present
and discuss before the start of operations with
the park’s management robust and sustainable
solutions to temporarily store, and effectively
handle and treat this waste.
b) Maintenance Procedures
The park’s management will perform consistent
and periodic (e.g. weekly or monthly where
necessary) checks to assess investor
adherence to established waste generation,
storage and disposal guidelines. In the event
that these guidelines have been violated,
immediate action to help facilitate investor
compliance is important as a precaution to
contaminating the dam.
iii) Ecological Protection
a) Screening Criteria
‘Ecological Protection’ concerns controlling the
overall effects of industrialization with a view to
protecting the environment in and immediately
surrounding Lembah Chuping. Therefore, to
minimize the negative impact of the proposed
future industries on these areas, investors will
be subject to restrictions on the manner of
construction of their facilities/premises so as to
make sure that their activities will not impact the
soil condition in a manner that will lead to water
contamination. Such activities should also not
cause damage to the condition of the
surrounding vegetation and/or cause soil
erosion to the area. Furthermore, investors
should not make use of toxic/ radioactive
June 2015
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Chuping Valley Development Plan
materials that could have negative impacts on
the surrounding environment in terms of both
harmful emissions and/or waste generation.
b) Maintenance Procedures
Similar to the procedures mentioned above, the
park’s management will perform regular and
periodic (i.e. weekly or monthly depending on
necessity) checks to assess investor adherence
to the established safeguards against soil
contamination and erosion, deforestation, and
also reducing the heat island effect. The raw
materials, especially those which are toxic, used
in investors’ manufacturing processes will also
be assessed to determine if there are adequate
facilities for their storage and to prevent them
from contaminating the environment. In the
event that these guidelines have been violated,
action will be taken by park management to
immediately stop the effects of the impact on
the environment and help facilitate investor
compliance to prevent reoccurrence.
iv) Energy Generation and Consumption
a) Screening Criteria
Potential investors interested in establishing a
presence in Lembah Chuping should preferably
be those with substantiated 3-5 year track
records of having energy efficiency practices in
their operations. For those without a track
record, they should be able to produce
conclusive and firm evidence of the efficient
energy consumption practices of the operations
that they would like to set up in the park. It is
also important for these investors to have a plan
on continuous improvement, i.e. increasing the
efficiency of their energy consumption, for a
period of 5 years. In its assessments, the park
management could refer to standards such as
the ISO 50001 (Energy Management) and ISO
23045 (Energy Efficiency Assessment of
Buildings) for guidance. Furthermore, emissions
released from investor owned power generators
must meet the US EPA and the EEA’s
emissions standards by being treated, if
necessary, prior to their release into
surrounding environment.
b) Maintenance Procedures
The park’s management will undertake periodic
(e.g. weekly or monthly depending on
necessity) checks to assess investor adherence
to established emission control standards for
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Chuping Valley Development Plan
investor owned power generators located in
Lembah Chuping. In the event that these
standards have been violated, action will need
to be taken so that the adverse effects on the
environment can be immediately stopped and
prevented from occurring again through
ensuring compliance by the investors.
- This space intentionally left blank -
June 2015
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Targets set by government institutio
Institution Reduce energy/ clean Reduce materials used/ Redu
energy sources recycled materials cons
EU - Reduce greenhouse gas Among the targets set for the No measure
emissions by 20% (or even reduction of materials recycled and (yet). The W
30%, if the conditions are reduced are: proposes tha
right) lower than 1990; - Recycling and preparing for re-use authorities s
- 20% of energy from of municipal waste to be increased to water efficie
renewables; 70 % by 2030;
- 20% increase in energy - Recycling and preparing for re-use
efficiency.7 of packaging waste to be increased to
80 % by 2030, with material-specific
targets set to gradually increase
between 2020 and 2030;
- Phasing out landfilling by 2025 for
recyclable (including plastics, paper,
metals, glass and bio-waste) waste in
non hazardous waste landfills
corresponding to a maximum
landfilling rate of 25%.8
State of - increasing the percentage of - goal of 75 percent recycling, - goal of red
California renewable energy in the composting or source reduction of capita water
(US) state's electricity mix to 33 solid waste by 202013 202015
percent by 202012
- CalRecycle has now reached a
recycling rate of 82% for ten
materials. 14
7 The European Union set environmental targets as part of “Europe 2020”. Europe 2020 is the European U
8 Review of EU’s Review of Waste Policy and Legislation (2014) http://ec.europa.eu/environment/waste/ta
9 “A Water Blueprint for Europe” (2013). The EU’s “Water Blueprint” outlines actions that concentrate on b
and filling the gaps in particular as regards water quantity and efficiency. The objective is to ensure that
environment throughout the EU.
10 Review of EU’s Review of Waste Policy and Legislation (2014) http://ec.europa.eu/environment/waste/t
11 “EU Biodiversity Strategy to 2020 – towards implementation” http://ec.europa.eu/environment/nature/bio
12 California Energy Commission, 2013. http://www.energy.ca.gov/renewables/.
13 CalRecyle, 2013, http://www.calrecycle.ca.gov/75percent/.
14 The Climate Group, http://www.theclimategroup.org/who-we-are/our-members/the-state-of-california.
15 California Water Plan Update 2013, http://www.water.ca.gov/calendar/materials/vol3_urbanwue_apr_re
Chuping Valley Development Plan
ons and initiatives around the globe
uce water Reduce waste or Protect biodiversity/ support natural
sumption pollution ecosystems
eable targets set - Measures aimed at 2020 headline target:
Water Blueprint reducing food waste
generation by 30 % by Halting the loss of biodiversity and the degradation
at river basin 2025; of ecosystem services in the EU by 2020, and
should develop - Introducing an early restoring them in so far as feasible, while stepping
ency target.9 warning system; up the EU contribution to averting global
- Improving traceability of biodiversity loss.
ducing urban per hazardous waste. Waste
r use by 20% by Policy and Legislation.10 The six targets cover:
Thanks to the California 1. Full implementation of EU nature legislation to
Integrated Waste protect biodiversity
Management Board
(CIWMB) over 58% of 2. Better protection for ecosystems, and more use
waste was diverted from of green infrastructure
landfill to recycling and
reuse in 2009, up from 3. More sustainable agriculture and forestry
10% in 1990.16
4. Better management of fish stocks
5. Tighter controls on invasive alien species
6. A bigger EU contribution to averting global
biodiversity loss.11
n/a
Union’s ten-year growth strategy. http://ec.europa.eu/europe2020/index_en.htm.
arget_review.htm
better implementation of current water legislation, integration of water policy objectives into other policies,
a sufficient quantity of good quality water is available for people's needs, the economy and the
target_review.htm
odiversity/comm2006/2020.htm.
elease_16033.pdf.
June 2015
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Australia The Australian Climate n/a - goal of red
Authority recommends to the by 15% by 2
Australian Government:
- A minimum target for 2020
of 15 per cent below 2000
levels, plus 4 percentage
points from Australia’s
carryover under the Kyoto
Protocol. This target,
combined with a national
emissions budget of
4,193 Mt CO2-e for 2013–
2020, provides a clear course
for short-term action.
- A trajectory range tracking to
between 40 and 60 per cent
below 2000 levels by 2030,
and a national emissions
budget for 2013–2050 of
10,100 Mt CO2-e.17
16 The Climate Group, http://www.theclimategroup.org/who-we-are/our-members/the-state-of-california.
17 Austrialia’s Emmissions Reduction Goals, 2014, http://www.climatechangeauthority.gov.au/files/files/Ta
18 Australia’s Water Corporation, http://www.watercorporation.com.au/water-supply-and-services/solutions
19 Australia’s National Waste Policy, http://www.environment.gov.au/protection/national-waste-policy/abou
20 Australia’s Biodiversity Conservation Strategy http://www.environment.gov.au/biodiversity/publications/a
Chuping Valley Development Plan
ducing water use Australia has a National Australia has a Biodiversity Conservation Strategy
2030.18 Waste Policy in place, but 2010-2030 in place. The vision of the Strategy is
did not include measurable that Australia’s biodiversity is healthy and resilient
KPI’s.19 to threats, and valued both in its own right and for
its essential contribution to our existence.20
arget-Progress-Review/Targets%20and%20Progress%20Review%20Final%20Report_Part%20C.pdf.
s-to-perths-water-supply/reducing-water-use
ut.
australias-biodiversity-conservation-strategy-summary
June 2015
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Chuping Valley Development Plan
7.1.2 Research Method
The research for potential investors has been conducted using
qualitative information obtained from primary sources (e.g.
desktop research using information from corporate websites,
annual and environmental reports) and secondary sources
(e.g. desktop research using information as published in
journal articles, encyclopedias, and magazines). The
companies are analysed on four factors: industry, degree of
greenness, financial viability, and location.
First, the companies are selected because they are active in
(one of the) proposed industry sectors for Lembah Chuping.
Secondly, it has been analysed whether the companies’
activities and production process are a match with the vision
for Lembah Chuping and to the extent they meet the proposed
five criteria for “green”.
The next factor taken into consideration is the financial
capability of the company. To determine this we have looked at
the revenue, net income and total assets of the potential
company. A company should be ‘financially healthy’ and in the
possession of financial resources to make an investment.
Lastly, the current location of the potential investor is looked at.
A company that is not present in Malaysia at the moment could
face some barriers to enter (e.g. lack of knowledge of the local
market, culture and laws and regulations). On the other hand,
investing in Lembah Chuping it could be an opportunity to
enter the Malaysian (or Asian) market. Companies which are
already present in Malaysia or nearby the State of Perlis have
the advantage of being familiar with the country, but currently
do not have expansion plans at the moment.
7.1.3 Limitations
Please note that the analysis is done based on information
which is publicly available. This could limit the analysis since
there is no insight in the company’s investment and growth
strategy which is kept internally and is only known to the board
of management.
In addition, not all potential companies have made it publicly
available whether their production process is green or whether
they share the green vision. Since we do not want to exclude
these potential companies from the analysis, they are left in
the report. A more through assessment to short-list these
companies will be given in the Final Report, together with a list
of halal F&B companies.
Evaluation of Investors
For each company, the match with each of the five proposed
criteria for green is presented in the tables below. The last
column of each table presents a conclusion based on the
company’s overall match with the proposed criteria for green,
their match with the proposed industries, financial viability and
location.
June 2015
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Chuping Valley Development Plan
When a company matches two out of the four factors for
analysis, (i.e. match with the proposed industries, financial
viability and/or willing/able to relocate), it is concluded that the
company could be a potential investor in Lembah Chuping.
Refer to Appendix 7 for the full analysis.
7.2 Proposed Industries
7.2.1 Green Energy Generation
Within the area of renewable energy, there are indications that
the solar industry is perhaps the most attractive industry in
Malaysia. Therefore, the majority of the potential investors as
listed on the following pages are active in the solar industry.
However, the Malaysian solar industry can be considered to be
in the infancy stage currently and supporting industries are not
in place yet. In addition to solar energy firms, companies active
in the other field of green energy generation are also included
in the list.
7.2.2 Solar Energy Firms
Based on desktop research, there are six companies currently
active in the domestic market. The six solar firms which are
active in the domestic market are Q-Cells Solar, AUO
SunPower, Panasonic, EQ Solar, Solexel. In addition to the
above mentioned six companies, other potential investors for
Green Energy Generation in Lembah Chuping focusing on
solar energy are stated in the table below.
Table 7.1: Summary of Potential Solar Energy Generation Investors
Solar Energy Companies
Reduce Reduce Protect Conclusion
energy/ materials biodiversity/
Company Origin clean Reduce water Reduce
energy used/ consumption waste or support
sources recycled pollution natural
materials ecosystems
Honda JP
SolarWorld DE
First Solar US
Panasonic JP
Tek Seng MY
AUO US
SunPower
Solar Frontier JP
Cypark MY
Resources
Tokoyuma JP
Red Solar MY/US
Canadian Solar CA
Conergy DE
DelSolar TW
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Chuping Valley Development Plan
Evergreen CN
Solar
GT Advanced US
Technologies
JinkoSolar US
JA Solar CN
Solarwatt DE
Allterra Solar US
Tenaga MY
Nasional
OCK Group MY
Q-Cells Solar DE
EQ Solar CN
Solexel US
Legend
Criteria for “green” Conclusion (refer to Appendix 7)
Company matches at least two of the proposed Company matches at least two of our of the four factors analysed
criteria. (green, industry, finance, location)
Indecisive Not enough information available/ Indecisive
7.2.3 Other Green Energy Generating Companies
Besides solar energy, other forms of green energy generation
exits today. The ta
ble below presents on overview of potential investors in
Lembah Chuping active in other fields of green energy
generation.
Table 7.2: Summary of Other Potential Green Energy Generating Investors
Other Green Energy Generating Companies
Reduce Reduce Protect Conclusion
energy/ materials used/ biodiversity/
Company Origin Reduce water Reduce
MY clean recycled consumption waste or support
IRIS energy materials pollution natural
Corporation sources ecosystems
ReEnergy
Holdings US
Vyncke
Abengoa BE
Wah Seong ES
Amersco MY
US
Legend
Criteria for “green” Conclusion (refer to Appendix 7)
Company matches at least two of the Company matches at least two out of the four factors analysed (green, industry,
proposed criteria. finance, location)
Indecisive Not enough information available/ Indecisive
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Chuping Valley Development Plan
7.2.4 Green Manufacturing
The term ‘Green Manufacturing’ can encompass a wide variety
of industries. Based on analysis applying the Porter Diamond
Model as summarized in section 7.2, the two potential
industries for Lembah Chuping are:
• Regarding green building materials, there are indications
for a presence of a domestic and regional market for green
building materials, in addition to upstream service support
and favourable government policies. Green building
materials are composed of renewable, rather than non-
renewable resources. Green materials are environmentally
responsible because impacts are considered over the life
of the product.
• Within manufacturing, Electronics & Electrical (E&E) is a
high growth sector and especially LED lighting trends
further point to the presence of a regional market for
energy-efficient products.
The potential investors are analysed against the criteria for
green as proposed for Lembah Chuping and other factors
(industry, financial, location). Competition for investors may be
intense given the presence of an E&E hub in Penang.
However, the E&E hub in Penang could also provide value
chain support for Lembah Chuping.
The table below gives an overview of potential investors in
Lembah Chuping within green manufacturing.
Table 7.3: Summary of Potential Investors in the Green Manufacturing
Sector
Green Manufacturing
Reduce Reduce Reduce water Reduce Protect Con-
energy/ materials consumption/ waste or biodiversity/ clusion
pollution
Company Origin Industry use used/ water support
clean recycled conservation natural
PaperFoam energy materials/ ecosystems
GS Yuasa sources recycling
Corporation
Sanyo / NL Packaging
Pansonics
VS Lightning AT Batteries
Solutions
JP E&E
E&E
DE
Ball US Packaging
Corporation
JP Various
Philips JP Batteries
Primearth EV MY E&E
Energy
Water,
Globetronics
Technology
Ecolab
JP hygiene,
energy
services
June 2015
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Sharp JP Various Chuping Valley Development Plan
Corporation
June 2015
Sumitomo JP Various Page 7-15
Corporation
APP Timber MY Raw
materials
NEC CA IT
Corporation
Osram DE E&E
LG KR E&E
Electronics
Johnson Batteries
Controls US and
electronics
Hitachi JP Various
Sony JP E&E
Corporation
Khärs SE Building
materials
Mitsubishi JP Various
Group
Electrovaya JP Batteries
Triodonic AT E&E
Epistar TW E&E
Phocos DE E&E
AFM Safecoat US Building
materials
Ecotimber US Building
materials
Nature’s CA Building
Carpet materials
Wageningen NL University
University
Radiant Trade US LED sales
MBN DE E&E
VerySol DE E&E
OMS HR E&E
AEG DE E&E
Cree US E&E
Luminus US E&E
Devices
LED Engin US E&E
Optogan RU E&E
Nichia JP E&E
Corporation
Carclo Optics UK E&E
Seoul KR E&E
Semiconductor
Chuping Valley Development Plan
Legend Conclusion (refer to Appendix 7)
Criteria for “green” Company matches at least two out of the four factors analysed
(green, industry, finance, location)
Company matches at least two of the
proposed criteria. Not enough information available/ Indecisive
Indecisive
The companies included in the table are active in a specific
industry. The Felda Investment Corporation (FIC) is an
investment arm of Federal Land Development Authority
(Felda). Being an investment company, this could be of
potential interest for Lembah Chuping. One of FIC’s primary
targeted sectors is property investment. FIC focuses on
property acquisition, development, construction, property
management and facilities management. This could be of
interest for the potential investors listed above. FIC could
support them in finding and developing property for their
operations.
FIC is not targeting green manufacturing companies
specifically, but has a focus on corporate social responsibility.
The FIC is now embarking on Felda’s ongoing housing
development projects consisting of Perumahan Generasi Baru
Felda (PGBF), Perumahan Warga Felda (PWF) which strives
to serve the agency’s corporate social responsibility for its
settlers by elevating the living quality of Felda’s new
generation.
The FIC Hospitality Division is one of the core divisions within
the FIC. In general, the division manages a chain of hotels
locally and abroad. In the near future, FIC could be a potential
investor through the provision of housing schemes with
structured and high quality infrastructure for the employees
working in Lembah Chuping. On the longer term, if Lembah
Chuping attracts more visitors and potentially tourists who
travel to the region, the hospitality division of the FIC could
invest in hotels.
7.2.5 Halal Pharmaceutical Manufacturing
Findings from the industry analysis indicate that firms in halal
pharmaceutical manufacturing might require additional support
with regards to halal requirements along the value chain.
These need to need to be adhered to, in sourcing of raw
materials and the use of logistics services compared to Green
Energy Generation or Green Manufacturing.
The table below gives on overview of potential investors in
Lembah Chuping’s proposed halal pharmaceutical industry.
However, none of the halal companies included in the table
below stated on their website that they consider themselves
green, nor that they have policies in place to e.g. reduce
energy and water consumption and reduce waste.
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Chuping Valley Development Plan
Table 7.4: Summary of Potential Halal Pharmaceutical Investors
Halal Pharmaceutical Manufacturing
Company Description Match
with
green
criteria?
CCM CCM Pharmaceuticals is principally engaged in n/a
Pharmaceuticals the manufacturing, distributing, importing and
Sdn. Bhd. exporting of pharmaceutical products and
medicines. Apart from being a contract
manufacturer for multinational pharmaceuticals
companies, CCM Pharmaceuticals also exports
its own products throughout ASEAN, Asia Pacific
and other parts of the world.
Easy Plus Easy Plus Pharmaceutical is herbal medicine and n/a
Pharmaceutical (M) health care product manufacturer, which was
Sdn. Bhd. established in 2004. Easy Plus is located in
Mergong Industrial Area.
Healwell The House of Healin is a market leader through n/a
Pharmaceuticals franchises in in biotechnology - based Health &
Sdn. Bhd. (House of Beauty Gamodulin Base products. They work on
Healin) product development and quality through
research. The company is located in Temasya
Industrial Park, Seksyen U1.
HOE HOE Pharmaceuticals is a dermatological n/a
Pharmaceuticals specialist company. Their activities encompass
Sdn. Bhd. R&D, manufacturing and marketing a wide range
of innovative and effective preparations that are
exported to over 45 countries. Their areas of
operation now include Asia, Africa, the Middle
East as well as the European Union. Their
manufacturing facility is based in Port Klang.
Jin Bin (M) Jin Bin Pharmaceutical is based in Alor Star, n/a
Pharmaceutical Kedah. Its main business is F&B manufacturing
Group Sdn. Bhd. and its main products are honey, glucose and
vinegar.
Herbs Pharma Sdn. HPSB is involved in all areas of the traditional n/a
Bhd. herbal product industry. HPSB clients are
traditional retailers and wholesalers. Currently,
HPSB represents pharmaceutical manufacturers
from Taiwan, USA, China and India. They
maintain relationships with major manufacturers
and suppliers. Despite being a relatively new
player in the market, they are starting to export
products to Korea, Taiwan, Japan, Singapore,
Philippines and Indonesia.
Nutri-Home Nutri-Home operates in conventional Chinese n/a
Pharmaceutical medicine.
Industries Sdn.Bhd. Their product categories are:
Dietary supplements
Digestive healthcare
Floral tea
Granules
June 2015
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Chuping Valley Development Plan
The company is located in Taman Industri
Subang, Subang Jaya.
Taisho Taisho's mission is to create and offer superior n/a
Pharmaceutical (M) pharmaceuticals and health-related products as
Sdn. Bhd. well as health-care-related information and
services that contribute to the enrichment of
people's lives by improving health in socially
responsible ways. Taisho's offerings consist of
pharmaceuticals and health-related products.
The company is located in Taman Perindustrian
Sri Plentong.
Upha Upha Pharmaceutical Manufacturing n/a
Pharmaceutical Mfg.
(M) Sdn. Bhd. manufactures and sells pharmaceutical products.
The company was incorporated in 1979 and is
based in Bandar Baru Bangi. Upha
Pharmaceutical Manufacturing operates as a
subsidiary of Chemical Co. of Malaysia Bhd
White Heron White Heron Pharmaceutical (WHP) is an herbal n/a
Pharmaceutical Sdn. medicine, pharmaceutical and health care
Bhd. product manufacturer. WHP has two production
plants; one for traditional pharmaceuticals and
one for Over The Counter (OTC) products. WHP
is located at Kepong Industrial Park.
7.2.6 Halal F&B Manufacturing
The second proposed halal industry for Lembah Chuping is
F&B manufacturing. Potential investors in this industry are
listed below.
Table 7.5: Summary of Potential Halal F&B Investors
Halal F&B Manufacturing
Company Description Match
with
green
criteria
Nutrifres Food & Nutrifres Food & Beverages (NFB) was established in n/a
Beverages year 2000. All products that we manufactured are halal
Industries Sdn. with Certified by JAKIM. NFB manufactures nutritious
Bhd. food, health drinks, food drink, and fruit drinks. NFB is
currently manufacturing, distributing and wholesaling
the brand both locally and more than 20 countries
internationally.
Soft Beverage Soft Beverage Marketing Sdn. Bhd. is incorporated in n/a
Marketing Sdn. 1998 and is one of the five largest manufacturers of
Bhd. carbonated drinks in Malaysia. They are specialised in
manufacturing carbonated and non-carbonated flavour
drinks and health and energy drinks.
They are located in a 12,000 sq. meter plant with a
land area of 5 hectors. The company also provides in-
house R&D.
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Purple Stars Purple Stars Food & Beverages was established in n/a
Food & 2011, with the vision of creating the highest quality
Beverages (M) instant coffee, milk tea and chocolate beverages. They
Sdn. Bhd. are located in Seremban and serve both domestic and
international clients from all across the globe. They
have a R&D team. Each of their beverages is
manufactured according to regulated, legislative
standards by the HACCP and Malaysia halal body, and
adheres to food and health safety guidelines.
7.3 Recommended Next Steps for Approaching Potential Investors
Once potential investors have been identified, they must be
approached as a means of gauging interest. This process will entail
the developing of a set of processes and procedures to create
awareness of marketing. Next steps will comprise the following:
i) Establish a Marketing/Investors Relationship Unit
The Marketing/Investors Relationship Unit will be a group
focused on initiating, developing, and managing relationships
with potential investors. Initially, only one (1) person will be
required to reach out to potential investors; given that the
preliminary stages of development and construction will last up
till 2020. Eventually, the goal is to have multiple officers
dedicated to 5 or 6 different regions.
ii) Set KPIs for this Unit
Key performance indicators (KPIs) must be put in place to
ensure that this function performs effectively; Lembah Chuping
attracts investors that are in line with the criteria outlined.
Examples of suitable KPIs could be the amount of the region
covered and tracking the number of responses received.
Once set up, this unit will have three (3) main functions:
1. Information Distribution
This unit will be responsible for monitoring the physical
progress of parks (drainage, roads, lighting, utilities etc.) to
provide investors with updates on the Lembah Chuping’s
development, while also monitoring the number and types of
relevant incentives (by liaising with MIDA).
2. Information Collection
Relevant data will be collected from investors as a means to
compare against established guidelines and safe guards, and
to gain an understanding of their requirements. Examples of
this data can be but are not limited to environmental statistics
(water consumption/usage, waste discharge, and emissions
generation), Green initiatives and industrial skill requirements.
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Chuping Valley Development Plan
3. Raising International Profile
Representatives from this unit will also attend key trade fair
(based on industry and regional targets) to both promote
Lembah Chuping, and to also collect relevant information from
participants.
SUMMARY
i) The state government needs to finalise a list of Green criteria to
facilitate the initial selection of investors, and to enforce the Green
concept within Lembah Chuping
ii) The eventual Green criteria are important because they will provide
an objective basis for targets and KPIs; which will help to measure
progress and performance
iii) Due to the lengthy process in woo-ing investors, preliminary
discussions by the state government and park management with
select investors will evaluate whether they meet the pre-established
Green criteria, while also assessing the factors that could most
attract them to relocate in Lembah Chuping
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8.0 INCENTIVES AND
BENEFITS
Chuping Valley Development Plan
8.0 INCENTIVES AND BENEFITS
Introduction to Proposed Incentives for the Development of
Lembah Chuping
The rapid growth in the mobility of international firms has resulted in
governments around the world attempting attract investors through
various types of incentives and benefits to spur investment in their
countries. Generally, incentives and benefits offered are targeted at
certain clusters of an economy in accordance to the country’s policy of
promoting the said clusters. Nevertheless, there are occurrences
where incentives and benefits are offered to a designated area or
industrial estates for the development of a particular area.
8.1 Existing Incentives and Benefits in Malaysia
For the development of Lembah Chuping, three (3) core clusters
have been identified to anchor the growth of the industrial park,
namely green manufacturing, halal industry and green energy
generation. In addition, supporting industries and key enablers are
critical to ensure that the core clusters in the industrial park have an
adequate business support and the right human capability for the
functionality and sustainability of their businesses.
8.1.1 Current Incentives for the Proposed Core Clusters
Cluster Incentives and Benefits
Tax Incentives
i. Pioneer Status (“PS”)
• Income tax exemption on 100% of statutory income
for 5 years – for the use and provision of Green
Technology (“GT”) services and systems
ii. Investment Tax Allowance (“ITA”)
• Green investment tax allowance (“GITA”) of 100% of
qualifying capital expenditure to be utilised against
100% of the statutory income incurred in relation to:
Green a. Project: Approved GT project; or
manufacturing b. Non-Project: acquisition of qualifying green
assets1
*Tax incentives for green manufacturing are proposed
incentives under Budget 2014
Non-Tax Incentives
i. Green Technology Financing Scheme (“GTFS”)
• Financing scheme to support the development of
GT;
• Interest subsidies of 2% from the total interest
charged;
• Government guarantee of 60% on the total
approved loan; and
• Training will be provided to applicants to enhance
knowledge on GT2
1 http://globalgreentag.com/sites/default/files/media/KeTTHA%20Budget%202014%20Tax%20Incentives
_1.pdf
2 https://www.gtfs.my/faq#n24150
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Halal industry Tax Incentives for Operators of Halal Parks with HALMAS
Status
• Income tax exemption on 100% of statutory
income for 10 years; or
• 100% of qualifying capital expenditure incurred
within a period of 5 years to be utilised against
100% of the statutory income for each year of
assessment; and
ii. Import duty and sales tax*
• Exemption on equipment, components and
machinery used directly in the cold room
operations in accordance to prevailing policies
* All current sales tax facilities are only valid until 31
March 2015 as the sales tax regime will be replaced
by the Goods and Services Tax (GST) effective 1
April 2015.
Tax Incentives for Halal Industry Players
• Income tax exemption on 100% of statutory
income for 5 years on export sales; or
• 100% of qualifying capital expenditure incurred
within a period of 10 years to be utilised against
100% of the statutory income for each year of
assessment; and
i. Import duty and sales tax
• Exemption on equipment, components and
machinery used for the development and
production of Halal promoted products; and
ii. Tax Allowance
• Double deduction on expenses incurred in
obtaining international quality standards,
Sanitation Standard Operating Procedures and
regulations on compliance on export markets
Tax Incentives for Halal Logistics Operators
• Income tax exemption on 100% of statutory
income for 5 years; or
• 100% of qualifying capital expenditure incurred
within a period of 5 years to be utilised against
100% of the statutory income for each year of
assessment; and
i. Import duty and sales tax
• Exemption on equipment, components and
machinery used directly in the cold room
operations in accordance to prevailing policies3
3 http://www.hdcglobal.com/publisher/gi_invesment_incentives
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Chuping Valley Development Plan
Green energy Tax Incentives
generation i. PS
• Income tax exemption on 100% of statutory
income for 10 years; or
ii. ITA
• 100% of qualifying capital expenditure incurred
within a period of 5 years to be utilised against
100% of the statutory income for each year of
assessment4
Non-Tax Incentives
i. Green Technology Financing Scheme (“GTFS”)
• Financing scheme to support the development of
green technology;
• Interest subsidies of 2% from the total interest
charged;
• Government guarantee of 60% on the total
approved loan; and
• Training will be provided to applicants to enhance
knowledge on GT
ii. Feed-in Tariff Scheme (“FiT”)
• Payment to renewable energy generator based on
FiT ;
• FiT rate varies for different renewable resources
and installed capacities;
• Bonus Fit rate applies when the criteria for bonus
conditions are met; and
• Duration of the FiT contract is based on the types
of the renewable resources
i) 16 years – biomass and biogas resources
ii) 21 years – Solar photovoltaic and small
hydropower5
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4 http://www.mida.gov.my/home/incentives-in-services-sector/posts/
5 http://seda.gov.my/overview_of_fit_concept_in_malaysia.html
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Summary of Existing Incentives for the Proposed Core Clusters in
Lembah Chuping
Table 8.1: Summary of Existing Incentives for Proposed Industries in
Lembah Chuping
Table 8.2: Codes for Types of Proposed Tax Incentives
Types of Tax Incentives Code Types of Non-Tax
Incentives
1.1 Pioneer Status 1.5 Financial Assistance/Grant
1.2 Investment Tax Allowance 1.6 Access to R&D Equipment
1.3 Import Duty Exemption 1.7 R&D Incentives
1.4 Sales Tax Exemption
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8.1.2 Current Incentives for Supporting Industries and Key
Enablers
Cluster Incentives Available
Tax Incentives
i. PS
• Exemption from income tax on 70% of statutory
income for 5 years; or
ii. ITA
• 60% of qualifying capital expenditure incurred within
a period of 5 years to be utilised against 70% of the
statutory income for each year of assessment;
Waste iii. Accelerated Capital Allowance
management • Capital expenditure incurred are eligible for an initial
allowance of 40% and an annual allowance of 20%
and recycling to be written off within three years6; and
iv. Import Duty and Sales Tax
• Exemption from import duty and/or sales tax on
imported machinery and equipment for waste
recycling activities
• Exemption from sales tax on locally manufactured
machinery and equipment for waste recycling
activities7
Tax Incentives
i. Contract R&D company
• PS - 100% income tax exemption on statutory
income for 5 years; or
• ITA - 100% on qualifying capital expenditure for 10
years to be set off against 70% of statutory income
ii. In-house R&D
• ITA - 50% on qualifying capital expenditure for 10
years to be set off against 70% of statutory income8
Research & iii. R&D company
Development • ITA - 100% on qualifying capital expenditure for 10
years to be set off against 70% of statutory income9
(R&D)
iv. Commercializing of R&D findings
• PS - 100% income tax exemption on statutory
income for 10 years on subsidiary company that
undertakes commercialisation of R&D; and
• Tax deduction equivalent to the amount of
investment given to a company invests in its
subsidiary company engaged in the
commercialisation of R&D10
Additional Incentives for Research and Development
6 http://www.mida.gov.my/env3/uploads/Services/IncentivesSept2011.pdf
7 http://www.mida.gov.my/home/incentives-in-services-sector/posts/
8 http://www.mida.gov.my/env3/uploads/Forms/Manufacturing/15082012/GD-RnD-JA2-02.pdf
9 http://www.mida.gov.my/env3/uploads/Forms/Services/15082012/GD-RnD-JA1-2.pdf
10 http://www.mida.gov.my/env3/uploads/Forms/Manufacturing/23112012/GD-CRD2.pdf
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Chuping Valley Development Plan
i. Double Tax Deduction
This is applicable to:
• Revenue (non-capital) expenditure for research
which is directly undertaken and approved by
Ministry of Finance;
• Cash contributions or donations o approved
research institutions;
• Payment for services of approved research
companies or institutions/contract R&D
companies/non related R&D companies/related
R&D
• Expenditure on R&D activities undertaken overseas
including training for Malaysian staff; and
• Approved R&D expenditure incurred during the tax
relief period for companies granted Pioneer Status
can be accumulated and deducted after the tax relief
period11
ii. Industrial Building Allowance
• Initial Allowance of 10% and annual allowance
of 3% for expenditure on qualifying capital
expenditure incurred on construction or
purchase of a building used for R&D purpose12
8.1.3 Current Incentives for Strategic Economic Corridors in
Malaysia
Region Incentives available Promoted
Clusters
Tax Incentives • Tourism
i. PS • Oil, Gas &
• 100% income tax exemption on 100% Petrochemical
of statutory income for 10 years; or
• Manufacturing
ii. ITA • Agriculture
• Education
• 100% of qualifying capital expenditure
East Coast incurred within a period of 5 years to
Economic be utilised against 100% of the
statutory income;
Region
(“ECER”) iii. Import Duty and Sales Tax
• Exemption on imported raw materials,
components, machinery, equipment
that are not produced locally and used
directly in the production activity;
iv. Stamp Duty
• Exemption on all transfer or lease of
land or building used for development;
11 http://www.mida.gov.my/env3/uploads/Services/IncentivesSept2011.pdf
12 http://www.mida.gov.my/home/administrator/system_files/modules/photo/uploads/20140215090558
_03%20RnD.pdf
13 http://www.mida.gov.my/env3/uploads/IncentivesCompilation/ECERDC/2013/AppVIII.pdf
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Chuping Valley Development Plan
v. Withholding Tax
• Exemption on fees for technical advice,
assistance or services or royalty up to
10 years; and
vi. Tax Deduction on Expenses
• Single and double tax deduction on
business activities conducted within
ECER region
Non-Tax Incentives
i. TERAJU-ECER Facilitation Fund/Unit
Kerjasama Awam Swasta (UKAS)
Facilitation Fund;
• Allocation of RM100 million to promote
the implementation of high value
private sector projects by Bumiputera
companies
• Grants cover 15% of the project cost
for investments ranging from RM5
million to RM 50 million
ii. Flexibility to recruit foreign knowledge
workers; and
iii. Discount rate for land premium, quit rent
and land assessment13
Tax Incentives • Financial
Services
i. PS
• ICT &
Creative
• 100% income tax exemption on 100% Industries
of statutory income for 10 years; or Logistics
ii. ITA • Tourism
• 100% of qualifying capital expenditure • Education
incurred within a period of 5 years to
be utilised against 100% of the • Healthcare
statutory income; •
Iskandar iii. Import Duty and Sales Tax
Malaysia
(“Iskandar”) • Exemption on imported machinery and
equipment for qualifying equipment
and machinery;
• Exemption from import duty or excise
duties and sales tax on one imported
or locally assembled car14;
iv. Real Property Gain Tax
• Exemption on capital gains tax on
disposal of property15;
v. Withholding Tax
• Exemption on all royalty and technical
14 http://www.mida.gov.my/env3/uploads/IncentivesCompilation/IRDA/2013/AppVII-2.pdf
15 http://www.lh-ag.com/storage/legal-herald/2013/q2-may-2013/Legal%20Herald%20Q2%202013.pdf
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Chuping Valley Development Plan
fee payment for non-residents for a
duration of 10 years; and
vi. Personal Income Tax
• 15% personal income tax on
chargeable income for knowledge
workers for 5 years
Non-Tax Incentive
i. Flexibility to recruit foreign knowledge
workers;
ii. Flexibility from foreign exchange
administrative rules set by BNM; and
iii. Exemption from Foreign Investment
Committee Rules.
Tax Incentives Tourism
i. PS Creative
Industries
• 100% income tax exemption on 100% Manufacturin
of statutory income for 10 years; or g:
ii. ITA i. Medium and
Sabah • 100% of qualifying capital expenditure heavy
Development
Corridor incurred within a period of 5 years to industries
(“SDC”)
be utilised against 100% of the ii.
Sarawak
Corridor of statutory income; Pharmace
Renewable
Energy iii. Import Duty and Sales Tax utical
(“SCoRE”)
• Exemption on imported machinery products
and equipment; and Halal Industry
iv. Stamp Duty Education
• Exemption on land acquired for Healthcare
development16
Tax Incentives Manufacturin
i. PS g
• 100% income tax exemption on 100% Research
of statutory income for 10 years; or and
Development
ii. ITA
Environmenta
• 100% of qualifying capital expenditure l
incurred within a period of 5 years to management
be utilised against 100% of the
statutory income;
iii. Import Duty
• Exemption on imported machinery and
equipment
iv. Reinvestment Allowance
• Allowance of 60% capital expenditure
incurred to be utilized against 100%
16 http://www.sedia.com.my/SDC_Incentives.html
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Chuping Valley Development Plan
of the statutory income;
v. Infrastructure Allowance
• 100% of qualifying expenditure; and
vi. Freight Charges Allowance
• Double Deduction on freight charges
on certain products
Non-Tax incentives
Allowance to own commercial land at low
entry cost with nominal down payment
and flexible terms of payment
Summary of Existing Incentives for Economic Corridors in Malaysia
Table 8.3: Summary of Existing Incentives for Economic Corridors in
Malaysia
Table 8.4: Codes of Tax Incentives for the Economic Corridors in
Malaysia
Code Types of Tax Incentives Code Types of Non-Tax
Incentives
1.1 Income Tax Exemption 1.5 Incentive for Knowledge
Workers
1.2 Investment Tax Allowance 1.6 Foreign Exchange
Administration Rules
1.3 Reinvestment Allowance
1.4 Exemption on RPGT
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8.2 Comparison of Incentives and Benefits with Other Countries
8.2.1 General Comparison against ASEAN Countries
Table 8.5: General Comparison against ASEAN Countries
Corporate Green Industry Halal Industry IT Based
Income 1.1 1.2 1.1 1.2
Country Tax (%) 1.3 1.1 1.2 1.3 1.3
Malaysia 25
Brunei 18.5
Philippines 30
Singapore 17
Cambodia 20
Indonesia 25
Laos 24
Myanmar 25
Thailand 20
Vietnam 22
Table 8.6: Codes of Types of Tax Incentives
Code Types of Tax Incentives
1.1 Income Tax Exemption
1.2 Investment Tax Allowance
1.3 Indirect Tax
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8.2.2 Comparison against Southern Thailand
With the aim to promote
investment and
development in the 4
border provinces in
Southern Thailand and 4
districts in Songkhla,
preferential incentives
have been introduced to
entice investors and
businesses to invest into
these areas. This could
create competition to
Lembah Chuping, which is
Figure 8.1: Thailand's Southern Provinces located in close proximity
to provinces in southern
Thailand. Hence, incentives and benefits offered in Lembah Chuping should
at least be similar or more favourable as compared with the incentives in
Southern Thailand.
Incentives and Benefits in Southern Thailand
Incentives available
Tax Incentives
8 year corporate tax income exemption – Additional 5 years reduction at
50% of corporate income
Exemption on import duty on machinery
75% import duty reduction on raw materials used in manufacturing for
domestics sales for 5 years
Double deduction from the costs of transportation, electricity and water
supply for 15 years
Additional 25% deduction of the cost of installation or construction of
facilities17
8.2.3 Comparison against Halal Food Industrial Estates at
Pattani (‘HFEI”)
Figure 8.2: Map of Southern Thailand (Pattani) Industrial Estate Authority of
Thailand, an agency tasked
to develop and manage
industrial estates and free
zones in the country has set
up a halal food industrial
estate at Pattani which is
envisioned to become a
global halal hub for food
manufacturing due to a large
population of Muslim located
in the south of Thailand.
Attractive incentives and
17 http://www.slideshare.net/SiamStartup/document-of-new-policy-eng-61924
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Chuping Valley Development Plan
benefits are offered for investments in this industrial estate and
similar preferential incentives and benefits should be offered to
investors in Lembah Chuping in order to compete with this
Industrial Estate.
Incentives available
Tax Incentive
Import Duty, Value Added Tax (VAT) and Excise Duty exemption on
imported and locally manufactured material
Export Duty, Value Added Tax (VAT) and Excise Duty exemption on
exported goods
Non-Tax Incentive
Right to own land in industrial estate
Freedom to remit money abroad
Freedom in employing expatriates and their spouse or dependents18
8.2.4 Hsinchu Science and Industrial Park (HSIP)
HSIP, dubbed as Taiwan Silicon
Valley has emerged as a paradigm
for science parks around the world
in fostering industrial clusters. It is
a science-based industrial park
which emphasizes on high
technology industries, comprising
of semiconductor, optoelectronics,
precision machinery among others.
Research and development is
strongly supported in HSIP and it is
home to a good number of state-
Figure 8.3: Hsinchu Science and Industrial owned research institutions with
Park (HSIP)
advanced R&D equipment and
human capital as privileged incentives and benefits for the
development of R&D are offered in HSIP to encourage the
activities of R&D.
Incentives available
Incentive for Research and Development
Import duty exemption for R&D Equipment
Innovative technology industry-academia cooperation project grants
i. Maximum grant of 10 Million NTD ~ RM1.12 Million
ii. Grant could not exceed 50% of project budget
R&D expenses can be deducted from corporate income tax up to 15% but
the total deducted expenses can not exceed 30% of the total corporate
income tax.19
18 http://www.hemaraj.com/page/industrial_estate_authority_of_thailand.asp
19 http://www.sipa.gov.tw/english/home.jsp?serno=201003250003&mserno=201003210002&menudata
=EnglishMenu&contlink=content/investment_2_2.jsp&level3=Y&serno3=201003250005
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8.2.5 Eco World Styria (Eco World)
Eco World Styria, an eco-
innovation and green
technology cluster with a strong
focus on research-industry-
government was formed to take
innovation to a higher level. Eco
World environmental
engineering cluster has
facilitated the growth of 150
clean-technology companies
Figure 8.4: Eco World Styria providing 15 000 jobs in
renewable energy and
environmental technology in the state of Styria in the southeast
of Austria.
Incentives available
Incentives for Research and Development
Incentives are available for research intensive entities – form of a cash tax
credit
i. 10 % of R&D expenses up to a total payment of €100,000 per fiscal year
8.2.6 Comparison Analysis
Comparison against Southern Thailand
Aspects Incentives Incentives Assessment
available in available in
Southern
Malaysia
Thailand
Corporate 8 years( 100% 10 years 100% Even though the
Income income tax income tax exemption period in
exemption) + exemption Southern Thailand is
5 additional longer than Malaysia,
years at 50% businesses in Southern
corporate tax Thailand will only enjoy
reduction 50% corporate tax
deduction after the end of
8 year.
Import of 100% 100% Lembah Chuping should
Goods exemption on exemption on be accorded with the
machinery machinery and same incentives available
raw materials in Malaysia for importation
75% import used in the of goods in order to be
duty reduction manufacturing competitive with Southern
on raw process Thailand
materials
June 2015
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Chuping Valley Development Plan
Aspects Incentives Incentives Assessment
available in available in
Southern
Malaysia
Thailand
Transportation Double tax Currently, there Despite the fact that
and Utilities deduction on is no such tax double tax deductions on
Cost costs of deduction transportation and utilities
transportation, available for cost are not available in
electricity and such costs Malaysia, businesses in
water supply Malaysia with Pioneer
for 15 years Industrial Status are compensated
Building with 10 years 100%
Additional Allowance is income tax exemption.
25% only allowed for
deduction of certain indusries For Lembah Chuping to
the cost of be more attractive, such
installation or incentives should be
construction of extended to a minimum of
facilities 15 years for businesses
within the industrial park
Comparison against HFEI, HSIP and Eco World
Broadly, the incentives and benefits in HFIE (for the halal food
industry), HSIP and Eco World (for the Research and
Development sector) as specified above are currently available
in Malaysia. With regards to this, in making Lembah Chuping
to be attractive for potential investors, similar or enhanced
incentives and benefits should be extended to Lembah
Chuping for the park’s benefit.
8.3 Proposed Incentives for the Development of Lembah Chuping
8.3.1 Rationale for Proposed Incentives for the Development of
Lembah Chuping
The proposed incentives consist of two (2) forms i.e.:-
Existing Incentives
Current Incentives that are provided by MIDA and other
relevant agencies in Malaysia have stringent criteria for
companies to adhere in order to obtain the incentives and
benefits provided by them. Thus, the qualifying criteria to enjoy
these incentives and benefits in Lembah Chuping are lowered
and relaxed so that tenants will be able to benefit from these
incentives and benefits.
Enhancement or New Incentives
Enhanced incentives and benefits are proposed for the
development of Lembah Chuping in order to be competitive
June 2015
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Chuping Valley Development Plan
against incentives and benefits offered to investors by similar
developments in Malaysia and the ASEAN region. Attractive
incentives and benefits are both offered in Southern Thailand
and Halal Food Industrial Estate in Pattani which will provide
competition in attracting investors to Lembah Chuping. Hence,
the proposed incentives and benefits in Lembah Chuping have
to match, or are more attractive than those offered in the areas
above.
Similar non-tax incentives and benefits that are offered by
similar development in Malaysia (Iskandar Malaysia & ECER)
are also being offered for the development of Lembah
Chuping, with an addition of few enhancements to the
incentives and benefits offered by these developments.
In addition to enhanced incentives and benefits, new attractive
incentives are also being proposed in order for Lembah
Chuping to have a unique selling proposition to attract
investments into the industrial park. The proposed
new/enhancements to the incentives and benefits are
highlighted in bold in the proposed incentives sections below.
For the development of Lembah Chuping, several privileged
proposed incentives are being offered to residents in the park.
These proposed incentives are supported by justifications and
factors in formulating these incentives. These justifications are
included in the following:
i) Lembah Chuping is a Greenfield area
As a Greenfield area, livability factors might serve as a
grave concern for investors considering to establish or
relocate their businesses to Lembah Chuping. This is
because quality of life of its employees is an important
aspect of consideration for the establishment and
relocation of their businesses. Furthermore, the long
gestation period of a Greenfield area to be developed
into matured industrial estates requires attractive
incentives in the development phase of the industrial
estates.
ii) Labour Supply
It is essential for Lembah Chuping to attract semi-
skilled and skilled labour as high-technology industries
are knowledge-workers intensive industry. The
demand of knowledge workers will increase in tandem
with the growth of Lembah Chuping, therefore it is
important for incentives for attracting knowledge
workers are offered in Lembah Chuping.
iii) Infrastructure readiness
As mentioned, as Lembah Chuping is a Greenfield
area, the infrastructures (such as road, water plants,
and telecommunication network) are not developed yet
in this area. Therefore incentives to spur the
June 2015
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Chuping Valley Development Plan
development of hard infrastructures should be
emphasized in Lembah Chuping.
8.3.2 Green Manufacturing
The establishment of a green manufacturing hub in
Lembah Chuping would create a unique selling
proposition (“USP”) as the state of Perlis will have a
first-mover advantage in green technology as
compared to other states in Malaysia. Besides that, the
rising demand for green products globally indicates the
rise in awareness of environmental consideration.
Therefore, attractive incentives and benefit should be
offered in Lembah Chuping to attract investors to invest
in green technology which could also help to reduce the
impact and preserve its surrounding environment.
Proposed Incentives Eligibility Criteria
Tax Incentives i) Company must be locally
• PS – Income tax exemption of 100% of incorporated under
statutory income for 10 years with twice 5-
Company Act 1965 and
year extension (10 + 5 + 5) for the use of
resident in Malaysia;
green technology services and systems; or ii) Company which incur
• ITA – 100% of qualifying capital expenditure qualifying capital
to be utilized against 100% of statutory
income for 10 years with once 5 year expenditure in respect of
extension (10 + 5);
Green Technology (‘GT”)
equipments and products
must be certified by
• Import Duty exemption for raw materials, Malaysia Green
components, machinery, equipments, spare
Technology Corporation
parts and consumables that are not
(“MGTC”); and
produced locally and used directly in the iii) GT equipment and
manufacturing process; and products must be used in
• Withholding tax exemption on royalty and the business carried out
technical fees in Malaysia
• Incentives for Approved Knowledge
Workers: 15% flat tax rate on chargeable
income
• Incentive for Knowledge Workers (for both
Local and Foreign Workers): Exemption
on import and/or excise duty on purchases
of one car
Non-Tax Incentives Eligible Criteria for
Knowledge Worker
• Liberalized forex regulations on outward
remittances to non-residents i) Malaysia citizen or foreign
citizen
• Offshore retention of export proceeds
ii) Bachelor degree or
• Unrestricted Employment of Foreign master degree in any
Knowledge Workers professional or technical
field from a college,
• Permanent Resident Status for the institution or university
spouse and dependent of knowledge recognized by the
workers Government of Malaysia
June 2015
Page 8-16
Chuping Valley Development Plan
Proposed Incentives Eligibility Criteria
• Relief from the obligation for and has at least 5 years
contributing to HRDF fund but eligible of working experience in
for training grants for Malaysian any qualified activity; Or
employees Doctoral degree in any
professional or technical
field from a college,
institution or university
recognized by the
Government of Malaysia
and has at least 3 years
of working experience in
any qualified activity
iii) The employer must be a
company incorporated
under Companies Act
1965 and carrying out
business in Lembah
Chuping
8.3.3 Halal Industry
To capitalise on the growing international demand for halal
products due to a sizable and growing Muslim population
around the globe, halal producers in Malaysia should seize the
opportunity to grow their business domestically and
internationally. In addition, with the implementation of Asean
Economic Community (“AEC”) in the pipeline and a huge
Islamic population in Southern Thailand, there will be
increasing demand for halal products in the ASEAN and
Middle East region that will support the growth of the halal
industry.
Proposed Incentives Eligibility Criteria
Tax Incentives for Operators of Halal Parks i) Company must be locally
with HALMAS Status
incorporated under
• PS – Income tax exemption of 100% of Company Act 1965 and
statutory income for 10 years with twice resident in Malaysia; and
5-year extension (10 + 5 + 5); or ii) Company must comply
• ITA - 100% of qualifying capital with HDC Designated
expenditure to be utilized against 100% of Halal Parks Development
statutory income for 10 years with once Guidelines
5-year extension (10 + 5);and
• Import duty exemption on equipment,
components and machinery used directly
in the Cold Room Operations
• Incentives for Approved Knowledge
Workers: 15% flat tax rate on chargeable
income
• Incentive for Knowledge Workers (for
both Local and Foreign Workers):
Exemption on import and/or excise duty
on purchases of one car
June 2015
Page 8-17
Chuping Valley Development Plan
Proposed Incentives Eligibility Criteria
Tax Incentives for Halal Industry Players i) Company must be locally
• Pioneer Status – Income tax exemption of incorporated under
100% of statutory income for 10 years Company Act 1965 and
with twice 5-year extension (10 + 5 + 5); resident in Malaysia;
or ii) Company must always
• Investment Tax Allowance – 100% of comply with prescribed
qualifying capital expenditure against quality, hygiene and
100% of statutory income for 10 years environmental guidelines;
with once 5 year extension (10 + 5); and
• Import duty exemption on raw materials iii) The employment of high
used for the development and production valued knowledge
of halal promoted products; and workers with a minimum
of 10% of the total
• Double deduction on expenses incurred in
workforce – at least 2
obtaining international quality standards
halal compliance
such as HACCP, GMP, Codex
officers
Allimentarious (food std guidelines of FAO
& WHO), Sanitation Std Operating
Procedures and regulations for
compliance for export markets such as
Food and Traceability from farm to fork
• Incentives for Approved Knowledge
Workers: 15% flat tax rate on chargeable
income
• Incentive for Knowledge Workers (for
both Local and Foreign Workers):
Exemption on import and/or excise duty
on purchases of one car
Tax Incentives for Halal Logistics Operators i) Company must be locally
incorporated under
• PS – Income tax exemption of 100% of Company Act 1965 and
statutory income for 10 years with twice resident in Malaysia;
5-year extension (10 + 5 + 5); or
ii) Company must be
• ITA – 100% of qualifying capital involved in integrated
expenditure against 100% of statutory logistics services,
income for 10 year with once 5-year comprising of three (3)
extension (10 + 5) activities:
• Incentives for Approved Knowledge Forwarding
Workers: 15% flat tax rate on chargeable
income Warehousing and
• Incentive for Knowledge Workers (for Transportation
both Local and Foreign Workers):
Exemption on import and/or excise duty iii) Must have basic
on purchases of one car infrastructure:
Fleet of commercial
vehicle (at least 10
units)
Warehouse (at least
2,500 sq ft)
Non Tax Incentives for Halal Industry Players Eligible Criteria for
Knowledge Worker
• Liberalized forex regulations on outward
remittances to non-residents Refer to the eligible
criteria stated in 8.3.2
• Offshore retention of export proceeds
• Unrestricted Employment of Foreign
Knowledge Workers
June 2015
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Chuping Valley Development Plan
Proposed Incentives Eligibility Criteria
• Permanent Resident Status for the
spouse and dependent of knowledge
workers
• Relief from the obligation for
contributing to HRDF fund but eligible
for training grants for Malaysian
employees
8.3.4 Green Energy Generation
Renewable energy is a valuable alternative source of energy to
fossil fuels as the supply of fossil fuels will diminish and cause
the price to increase in the near future. Therefore, the prospect
of renewable energy generation remains upbeat as the
demand for renewable energy will increase overtime as the
importance of having a sustainable source of energy to
conserve the environment is accentuated to reduce the impact
to the environment.
Proposed Incentives Eligibility Criteria
Tax Incentives i) Company must be locally
i) incorporated under
• PS – Income tax exemption of 100% of Company Act 1965 and
statutory income for 10 years with twice resident in Malaysia;
5-year extension (10 + 5 + 5); or
Renewable energy
• ITA – 100% of qualifying capital resources that can be
expenditure against 100% of statutory used and energy forms
income for 10 years with once 5-year are specified
extension (10 + 5);
• Import Duty exemption for components, ii) Eligible Criteria for
machinery and equipments used directly Knowledge Worker
in the green energy generation Refer to the eligible
criteria stated in 8.3.2
• Withholding tax exemption on royalty and
technical fees
• Incentives for Approved Knowledge
Workers: 15% flat tax rate on chargeable
income
• Incentive for Knowledge Workers (for
both Local and Foreign Workers):
Exemption on import and/or excise duty
on purchases of one car
Non-Tax Incentives
• Extension of Feed-In-Tariff for Solar
Energy: Duration of FiT for Solar Energy
to be extended for another 5 years (21 +
5)
• Unrestricted Employment of Foreign
Knowledge Workers
• Permanent Resident Status for the
spouse and dependent of knowledge
workers
• Relief from the obligation for
contributing to HRDF fund but eligible
for training grants for Malaysian
employees
June 2015
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Chuping Valley Development Plan
8.3.5 Research and Development (R&D)
R&D plays an important role for companies today in order to
meet the global challenges of new technology revolution and
competition, especially in high-technology industries that
require constant innovation and invention to cater for the
demand of consumers. Furthermore, special incentives and
benefits for R&D are offered in HSIP and Eco World to
encourage the tenants in the industrial parks to create a edge
over their competitors. Hence, Incentives and benefits to
encourage R&D in Lembah Chuping is essential for tenants to
have a cutting-edge over their competitors.
Proposed Incentives Eligibility Criteria
Contract R&D
• PS – Income tax exemption of 100% of i) The R&D activities
undertaken must comply
statutory income for 10 years with twice
with the definition of R&D
5 year extension (10 + 5 + 5); or
under the Promotion of
• ITA – 100% of qualifying capital Investment Act (“PIA”)
expenditure against 100% of statutory 1986
income for 10 year with once 5 year ii) The R&D activities
extension (10 + 5);
undertaken must be in
• Import Duty exemption for, machinery and accordance with the
equipments used directly in R&D; and needs of the country and
• bring benefits to the
Withholding tax exemption on royalty and Malaysian economy;
technical fees iii) 50% of the income of the
• Incentives for Approved Knowledge company should be
Workers: 15% flat tax rate on chargeable derived from R&D
income activities;
• Incentive for Knowledge Workers (for iv) At least 35% of the
both Local and Foreign Workers): workforce of
Exemption on import and/or excise duty manufacturing-based
on purchases of one car company or 3% of the
workforce of agricultural-
R&D company based company must be
• ITA – 100% of qualifying capital personnel with degree or
expenditure against 100% of statutory diploma in technical fields
income for 10 years with once 5 year
extension (10 + 5); or
• Import Duty exemption for, machinery and
equipments used directly in R&D;
• Withholding tax exemption on royalty and
technical fees
• Incentives for Approved Knowledge
Workers: 15% flat tax rate on chargeable
income
• Incentive for Knowledge Workers (for
both Local and Foreign Workers):
Exemption on import and/or excise duty
on purchases of one car
June 2015
Page 8-20
Chuping Valley Development Plan
Proposed Incentives Eligibility Criteria
In-house R&D i) The R&D activities
• ITA – 75% of qualifying capital undertaken must comply
expenditure against 100% of statutory with the definition of R&D
income for 10 years; under the Promotion of
Investment Act (“PIA”)
• Import Duty exemption for, machinery and 1986; and
equipments used directly in R&D; and ii) The R&D activities
• Withholding tax exemption on royalty and undertaken must be in
technical fees accordance with the
needs of the country and
• Incentives for Approved Knowledge bring benefits to the
Workers Malaysian economy
• 15% flat tax rate on chargeable income
• Incentive for Knowledge Workers (for
both Local and Foreign Workers):
Exemption on import and/or excise duty
on purchases of one car
Commercialization of R&D findings i) Company must be locally
• PS - Income tax exemption on 100% of incorporated under
Company Act 1965 and
statutory income for 10 years with once
resident in Malaysia; and
5-year extension (10 + 5); and
ii) Full Foreign Ownership
• 150% tax deduction given to a company is permissible for
investment for the commercialisation of company to
R&D findings by its subsidiary commercialize R&D
• Incentives for Approved Knowledge findings
Workers: 15% flat tax rate on chargeable
income
• Incentive for Knowledge Workers (for
both Local and Foreign Workers):
Exemption on import and/or excise duty
on purchases of one car
Non-Tax Incentives Eligible Criteria for
Knowledge Worker
• Unrestricted Employment of Foreign
Knowledge Workers; Refer to the eligible
criteria stated in 8.3.2
• Permanent Resident Status for the
spouse and dependent of knowledge
workers; and
• Relief from the obligation for
contributing to HRDF fund but eligible
for training grants for Malaysian
employees
June 2015
Page 8-21
Chuping Valley Development Plan
8.3.6 Waste Management and Recycling
A dedicated waste management and recycling plant in Lembah
Chuping should be in place to manage the discharge and
waste produced from the residents in Lembah Chuping. This is
also in line with Lembah Chuping green concept proposition
that is able to provide a conducive and environmental-friendly
workplace.
Proposed Incentives Eligibility Criteria
Tax Incentives i) Company must be locally
incorporated under
• PS – Income tax exemption of 100% of Company Act 1965 and
statutory income for 10 years with twice resident in Malaysia;
5-year extension (10 + 5 + 5); or
ii) Company have not
• ITA – 100% of qualifying capital commenced operation;
expenditure against 100% of statutory
income for 10 years with once 5-year iii) Fulfil 1 out of the 3
extension (10 + 5);and criteria stated below:
• Accelerated Capital Allowance – Capital Level of value-added
expenditure incurred for purchasing waste
recycling machinery and equipment to be Level of technology
fully utilized within 2 years; and as measured by the
Managerial,
• Withholding tax exemption on royalty and Technical and
technical fees Supervisory Index
• Incentives for Approved Knowledge Industrial Linkages;
Workers: 15% flat tax rate on chargeable and
income
iv) Only recycle
material/scrap that is
obtained within Malaysia
• Incentive for Knowledge Workers (for
both Local and Foreign Workers):
Exemption on import and/or excise duty
on purchases of one car
Non-Tax Incentives Eligible Criteria for
Knowledge Worker
• Unrestricted Employment of Foreign
Knowledge Workers; Refer to the eligible
criteria stated in 8.3.2
• Permanent Resident Status for the
spouse and dependent of knowledge
workers; and
• Relief from the obligation for
contributing to HRDF fund but eligible
for training grants for Malaysian
employees
June 2015
Page 8-22
Chuping Valley Development Plan
8.3.7 Academia/ Institution of Higher Learning
Human capital is one of the most valuable assets in any
organization as there is a positive correlation between a
company success and the effectiveness and efficiency of
human capital management. Hence, an institution of higher
learning in Lembah Chuping will provide an adequate human
capital support that is essential to support the development
and growth of tenants in the industrial park to become
competitive in their respective industries.
Proposed Incentives Eligibility Criteria
Tax Incentives i) Private Higher Education
• ITA – 100% of qualifying capital Institution (“PHEI”) must
expenditure against 100% of statutory be locally incorporated
income for 10 years with twice 5-year under Company Act 1965
extension (10 + 5 + 5); and resident in Malaysia
• Import Duty and Excise Duty Exemption ii) PHEI to obtain the
on all educational equipment including approval of Ministry of
laboratory, workshop, studio and Higher Education
language laboratory equipment; (“MoHE”)
• Withholding tax exemption on royalty and
technical fees;
• Accelerated Capital Allowances on
computers and information technology
assets including software acquired within
2 years
• Incentives for Approved Knowledge
Workers: 15% flat tax rate on chargeable
income; and
• Incentive for Knowledge Workers (for
both Local and Foreign Workers):
Exemption on import and/or excise duty
on purchases of one car
Non-Tax Incentives Eligible Criteria for
Knowledge Worker
• Unrestricted Employment of Foreign
Knowledge Workers; • Refer to the eligible
criteria stated in 8.3.2
• Permanent Resident Status for the
spouse and dependent of knowledge
workers; and
• Relief from the obligation for
contributing to HRDF fund but eligible
for training grants for Malaysian
employees
June 2015
Page 8-23
Chuping Valley Development Plan
8.3.8 Incentives for other Industries in Lembah Chuping
Proposed Incentives Eligibility Criteria
Tax Incentives i) Company must be locally
• PS – Income tax exemption of 100% of incorporated under
statutory income for 10 years with twice Company Act 1965 and
5-year extension (10 + 5 + 5); or resident in Malaysia
• ITA – 100% of qualifying capital ii) Company must conduct
expenditure against 100% of statutory its business activities
income for 10 years with once 5-year within Lembah Chuping
extension (10 + 5);
• Import Duty exemption for raw materials,
components, machinery, equipments,
spare parts and/or consumables;
• Withholding tax exemption on royalty and
technical fees;
• Incentives for Approved Knowledge
Workers: 15% flat tax rate on chargeable
income; and
• Incentive for Knowledge Workers (for
both Local and Foreign Workers):
Exemption on import and/or excise duty
on purchases of one car
Non-Tax Incentives Eligible Criteria for
• Liberalized forex regulations on outward Knowledge Worker
remittances to non-residents Refer to the eligible
criteria stated in 8.3.2
• Offshore retention of export proceeds
• Unrestricted Employment of Foreign
Knowledge Workers
• Permanent Resident Status for the
spouse and dependent of knowledge
workers
• Relief from the obligation for
contributing to HRDF fund but eligible
for training grants for Malaysian
employees
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June 2015
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Chuping Valley Development Plan
8.4 Cost Benefit Analysis
8.4.1 Introduction to Cost-Benefit Analysis (“CBA”)
A cost-benefit analysis (CBA) is often used as a means to
evaluate the potential costs and benefits that may arise when a
project is completed. For the purpose of this project, a CBA will
help to assist businesses in their decision-making on the
viability of undertaking a project. The potential costs and
benefits that may arise for Lembah Chuping are shown in the
table below:
Potential Costs Table 8.7: Potential Costs and Benefits
Potential Benefits
• Tax Revenue to the State and • Job Creation Opportunities
Federal Government • GNI Contribution
• Potential Investment into the park
8.4.2 Potential Cost Analysis
Table 8.8: Potential Cost Analysis Investment Tax
Allowance (RM
Revenue Forgone - Pioneer Status (RM
Million)* Million)**
Proposed Phase 1 Phase 2 Total Total (As at 2025)
Industries
(2016-2020) (2021-2025) (2016-2025)
Green E&E 1,153 1,808 2,961 -
Green Materials 257 403 660 -
Solar Energy 17 29 46 -
Generation
Halal Industries - 135 135 -
- 382 382 -
SMEs 1,427 2,757 4,184 3,596
Total
*The revenue forgone by the government by granting Pioneer Status(Income tax exemption) is
calculated by multiplying the Value-Added (GNI) figures of each industries with 24% (the
corporate tax rate from 2016 onwards) 20
**The Investment Tax Allowance is calculated assuming 80% of the Total potential investment
value will be entitled for ITA.
20 Economic Census 2011 (Manufacturing), DOSM
June 2015
Page 8-25
Chuping Valley Development Plan
8.4.3 Potential Benefit Analysis
Job Creation and GNI Contribution
Table 8.9: Job Creation and GNI Contribution
No. of Jobs GNI Contribution (RM mil)
Proposed Industries Phase 1 Phase 2 Total As at End of As at End of
Green E&E (2016- 2020) (2021- 2025) (2016-2025) Phase 1 Phase 2
2,779 463 3242 (2016- 2020) (2021- 2025)
1077.49 1690.2
Green Materials 1,998 333 2331 239.9 376.3
Solar Energy Generation 612 0 612 24.0 24.0
F&B 0 246 246 0 44.7
Halal 0 350 350 0 81.9
Industries
Pharmaceuticals
SMEs 0 5,892 5892 0 358.1
Total 5389 (42.5%) 7284 (57.5%) 12673 (100%) 1341.3 2575.1
Potential Investment Inflow into Lembah Chuping
Table 8.10: Potential Investment Flow into Lembah Chuping
Companies with Companies with
Investment Value Investment Value
(>RM100 Million) (RM (≤RM100 Million)
Million)
Average Investment 492,682,926.83 19,247,467.44
Value Per Company*
No.of Companies** 6 80
Total. 2,956,097 1,539,797
*The figures for average investment value per company are sourced from MIDA (Malaysia
Investment Performance Report 2013)21
**It is assumed that 7% of the companies in the industrial park are companies have investment
values which exceed RM100 Million.
8.5 Key Salient Points
For an industrial park to be regarded as attractive to investors, it would
depend on the incentives available in the park. Incentives offered
would need to be comprehensive and easily implementable in order to
facilitate the industry development and businesses growth in the park.
Industries in Malaysia, including the main and supporting industries
proposed for Lembah Chuping, have been benefiting from existing
incentives provided by both the Federal and State Governments. On
top of that, preferential/specific incentives have been given to the
Strategic Economic Corridors in Malaysia (i.e. Iskandar Malaysia, East
21 http://www.mida.gov.my/env3/uploads/PerformanceReport/2013/IPR2013
June 2015
Page 8-26
Chuping Valley Development Plan
Coast Economic Region, Sabah Development Corridor and Sarawak
Corridor of Renewable Energy) to stimulate more investment into
these regions.
To examine how attractive the existing incentives in Malaysia for the
proposed industries in Lembah Chuping are, comparisons have been
made against incentives in other ASEAN countries. Notwithstanding
the fact that Malaysia does not have the lowest corporate tax rate in
the region, in general the incentives offered for these industries
appear to be more attractive as compared to the other ASEAN
countries with regard to aspects such as rates, effective period and
coverage/scope. Due to Lembah Chuping’s proximity to Southern
Thailand, comparisons have also been drawn against Southern
Thailand and Halal Food Industrial Estate in Pattani. For Lembah
Chuping to compete with nearby country, the incentives within the
park needs to better off than or if not, at least match those available in
the Southern Thailand.
The proposed incentives for Lembah Chuping primarily aim to retain
and enhance (where appropriate) the existing incentives in Malaysia
as well as to seek for Lembah Chuping to be accorded with the similar
preferential incentives currently granted to other Malaysian industrial
estates (or even better) in terms of (but not limited to) the following:-
• Extension of the effective period (e.g. income tax exemption period
from 10 years at present to 15)
• More attractive allowances (e.g. investment tax allowance on
capital expenditure to be offset against 100% of the statutory
income instead of 70%)
• Relaxation of eligibility criteria for certain incentives (e.g. criteria
for 15% flat income tax rate on knowledge workers)
• Flexibility on certain administrative rules (e.g. flexibility from
foreign exchange administrative rules set by the Central Bank)
An attractive incentives package catered to the requirements of
industries in Lembah Chuping is highly likely to distinguish Lembah
Chuping from other industrial areas and be seen as appealing for
investors to establish/expand/re-locate their operations in this park. It
could contribute in creating more job opportunities for the rakyat of
Perlis and increasing the park’s Gross Domestic Product contribution.
As recommended next steps, a special incentives package proposal
should be developed for submission to the Ministry of Finance (MoF).
The proposal should be submitted either as a special application to
the Tax Division or as recommendations to the National Budget Office
in MoF for inclusion into the National Budget. Notwithstanding the
time-consuming lobbying process, the submission of proposal as a
special application to MoF would allow such incentives (once
approved) to be dedicated to Lembah Chuping only. On the other
hand, though it would likely to be prioritised for consideration, proposal
submitted and included into the National Budget might allow other
areas to be accorded with these preferential incentives as well. The
proposal would need to include (but not limited to) areas such as:-
The background of Lembah Chuping
Proposed incentives package and eligibility criteria
June 2015
Page 8-27
Chuping Valley Development Plan
Justifications for proposed incentives (e.g. cost-benefit
analysis and alignment with initiatives under the Malaysia Plan
etc)
Further to the proposal submission, presentation to the MoF for a case
on the incentives package is required. Agencies such as the
Economic Planning Unit, Central Bank, Inland Revenue Board,
Malaysian Investment Development Authority and Customs might be
invited by MoF to the presentation for input. During the presentation,
MoF is likely to provide its preliminary view on the proposed incentives
including those which would not be considered.
At present, there is no prescribed timeline for a decision to be derived
from MoF. Nonetheless, the decision would be driven by the following
factors:-
Prohibition under the current policy for enhancing/adding
certain incentives
Eligibility criteria for proposed incentives which are deemed to
be excessively relaxed
Insufficient justifications in the case of potential costs
substantially outweigh benefits
Difficulty in implementing the proposed incentives
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Chuping Valley Development Plan
SUMMARY
i) It is important to offer location specific tax and non-tax
incentives as a means to attract potential investors to Lembah
Chuping. Proposed incentives are illustrated as follows:
i) Pioneer Status: 10 year tax exemption with twice 5-
year extension
ii) Investment Tax Allowance: 100% of qualifying Capex
against 100% of statutory income for 10 years with
once 5-year extension
iii) Import and/or excise duty exemption for raw materials,
equipments and consumables
Tax iv) Withholding tax exemption on royalty and
incentives v) technical fees
15% flat tax rate on chargeable income for
approved knowledge workers
vi) Import duty and excise duty exemption for
purchases of one(1) car for both local and foreign
knowledge workers
vii) Accelerated Capital Allowance on capital
expenditure incurred for purchasing waste recycling
machinery and equipment to be fully utilized within 2
years for waste management and recycling
i) Liberalized forex regulations on outward
remittances to non-residents
ii) Offshore retention of export proceeds
iii) Unrestricted employment of foreign knowledge
workers
iv) Permanent Resident Status for the spouse and
dependent of knowledge workers
Non-Tax v) Relief from the obligation for contributing to HRDF
incentives fund but eligible for training grants for Malaysian
employees
vi) Extension of Green Technology Financing Scheme –
10 years for Green Energy Generation
vii) Extension of Feed-In-Tariff quota for Solar Energy:
Duration of FiT for Solar Energy to be extended for
another 5 years (21 + 5)
viii) R&D grant for collaboration on a 1-to-1 basis
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June 2015
Page 8-29
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