Malaysia's rapid industrial growth over the last decade has been governed by the Industrial Co-ordination Act 1975 (ICA), which aims to secure orderly development and growth in the country's manufacturing sector.

The ICA requires manufacturing companies with shareholders' funds of RM2.5 million and above or engaging 75 or more full-time employees to apply for a manufacturing license for approval by the Ministry of International Trade and Industry (MITI).

Applications for manufacturing licenses are to be submitted to the Malaysian Industrial Development Authority (MIDA), an agency under MITI in charge of the promotion and coordination of industrial development in Malaysia.

The government's guidelines for approval of industrial projects in Malaysia are based on the Capital Investment Per Employee (C/E) Ratio. Projects with a C/E Ratio of less than RM55,000 are categorised as labour-intensive and thus will not qualify for a manufacturing licence or for tax incentives. Nevertheless, a project will be exempted from the above guidelines if it fulfils one of the following criteria:

- Value-added is 30% or more;
- Managerial, Technical and Supervisory (MTS) Index is 15% or more;
- Project undertakes promoted activities or products as listed in the List of Promoted Activities and Products; and
- Located in the Eastern Corridor of Peninsular Malaysia (the states of Kelantan, Terengganu, Pahang and the district of Mersing in Johor), Sabah and Sarawak

Guidelines on Equity Policy

Tax Structures and Tax Agreements on Trade and Investments

Taxation in Malaysia

Sabah

The Sabah Government has a clearly defined and focused economic development policy and priorities towards three areas of economic development: agriculture, tourism and manufacturing. The main thrust of Sabah's economic development is spelt out in its Outline Perspective Plan, 1995-2010 (SOPP).

The Department of Industrial Development and Research was established in 1972 and was placed under the Ministry of Industrial Development, Sabah to promote, accelerate and coordinate industrial development in Sabah.

Sarawak

The Ministry of Industrial Development, Sarawak (MID) is a state agency established in 1987 to spearhead the development of the state's industrial sector. MID is responsible for the promotion, coordination and implementation of industrial development activities in Sarawak.

Labuan

Labuan island has a progressive local government which is one of the most efficient in Malaysia. The main local authority on the island to coordinate and expedite the overall development of Labuan in all aspects of economic, infrastructure, political and social endeavour is the Labuan Development Authority. The island has a thriving economy that evolves round oil and gas, offshore banking, shipbuilding, manufacturing, tourism and education.

Incentives for Investment