OECD Investment Policy Reviews: Malaysia 2013 #//OECD BETTER POLICIES FOR BETTER LIVES
Table of contents Preface by Dato' Sri Mustapa Mohamed, Minister of International Trade and Industry, Malaysia 11 Preface by Angel Gurria, Secretary-General, OECD 13 Acronyms and abbreviations 15 Executive summary 19 Assessment and recommendations 23 Progress and policy challenges 24 Key recommendations 33 Notes 39 Bibliography 40 Chapter 1. Investment trends 41 FDI trends in Malaysia in a long-term perspective 42 Malaysia now faces increasing competition from the rest of ASEAN in attracting foreign investment 43 FDI in Malaysia by country and by sector 46 Chapter 2. Investment policy: Towards greater openness 53 Investment policy reform: stability and change 1985-2012 55 Notes 74 Bibliography 74 Chapter 3. Property rights and Investor protection 77 Effective land ownership registration 78 Notes 100 Bibliography 101 Annex 3.AI. Main features of Malaysia's investment agreements... 104 Annex 3.A2. Investment agreements concluded by Malaysia 118 Chapter 4. Investment promotion and facilitation 121 Role of business in government policy 124 Promotion of outward investment 126 MIDA: Malaysia's investment promotion agency 127 Government measures to improve the business climate 131 OECD INVESTMENT POUCY REVIEWS: MALAYSIA 2013 OECD 2013 5
Malaysia's Investment attraction strategy: the central role ofincentives 136 Policies to promote Malaysian SMEs 142 SME-MNE linkages policies and practices 145 Skills shortages and mismatch 148 Malaysia's international initiatives to build Investment promotion expertise 155 Notes 155 Bibliography 155 Chapter 5. Corporate governance 159 Main features of Malaysia's corporate governance framework 161 Voluntaiy corporate governance initiatives and training 165 Shareholder rights in Malaysia 168 Governance of government-linked companies 177 Bibliography 183 Chapter 6. Policies for promoting responsible business conduct 185 Government vs business roles and responsibilities in promoting RBC 187 Government's initiatives to promote RBC in Malaysia 187 Financial and non-financial disclosure 194 Malaysia's intergovernmental co-operation to promote international RBC principles 199 Notes 202 Bibliography 203 Chapter 7. Financial sector development 205 Malaysia's gradual opening of its banking sector 208 The Financial Sector Master Plan: a comprehensive 10-year plan for the financial sector 211 Capital markets in Malaysia 219 The asset management industry 223 Notes 226 Bibliography 230 Chapter 8. Infrastructure development 233 Overview of Malaysia's infrastructure system 234 Telecommunications 242 Electricity 244 Transport 248 Water and sanitation 251 Notes 254 Bibliography 254 6 OECD INVESTMENT POL1CY REVIEWS'. MALAYSIA 2013 OECD 2013
Chapter 9. Investment framework in support of green growth 257 Green growth in Malaysia: Challenges and opportunities 258 Malaysia's commitment to green growth 261 Regulatory and policy framework for Investment in priority areas for green growth 266 Incentives for green Investment 269 Other sources of finance in support of green Investment 273 Capacity to design and implement green Investment policies 279 Policies to promote environmental^ responsible business conduct and to raise awareness 279 Tables Notes 282 Bibliography 285 1.1. FDI stock in Malaysia by country, 2011 47 1.2. Cross-border M&As involving Malaysian firms as targets, 2001-2011 47 1.3. FDI stock in Malaysia by sector, 2011 48 1.4. Stock of Malaysian FDI abroad, by country and by region, 2011. 50 1.5. Cross-border M&As involving Malaysian firms as acquirers, 2001-2011 50 1.6. Stock of Malaysian FDI abroad by sector, 2010 51 1.7. Major Malaysian acquisitions abroad, 2001-2011 52 2.1. Major liberalisation measures affecting Investment, 1998-2012. 58 2.2. Equity restrictions in financial services 64 4.1. OFDI Instruments offered by EXIM Bank 127 4.2. MIDA's Client Charter results, manufacturing licences (2011)... 128 4.3. Definition of SMEs in Malaysia 143 4.4. Malaysia's National Qualification Framework 152 5.1. Major laws and regulations affecting corporate governance... 162 5.2. Corporate governance enforcing agencies in Malaysia 165 5.3. NEAC Proposed divestment strategies for non-strategic GLCs.. 182 6.1. Stock of outward FDI (2011) 201 7.1. Share of GLCs in the financial sector 214 8.1. Malaysia's infrastructure competitiveness 234 8.2. PSP in Malaysia and the Region 236 8.3. Overview of GLCs in the infrastructure sector in Malaysia 240 9.1. Summary of environmental legislation and policies for green growth 262 9.2. Green investment incentives in Malaysia 270 9.3. Subsidy by type of fossil fuel in Malaysia 271 OECD INVESTMENT POUCY REVIEWS: MALAYSIA 2013 OECD 2013 7
9.4. Total project cost and green technology (GT) total cost for Green Technology-certified applications (as of April 2012).. 273 Figures 1.1. Long-term trends in FDI in Malaysia 43 1.2. Malaysian share of the total FDI stock in ASEAN, 1980-2011... 44 1.3. FDI reported by Malaysia and by OECD countries into Malaysia. 45 1.4. FDI stock in Malaysia by principal countries/regions, 2011 46 1.5. Foreign investment in the manufacturing sector 48 1.6. Inflows and outflows of direct investment, 1980-2011 49 2.1. Liberalisation of FDI restrictions in Malaysia and Indonesia over time 56 2.2. OECD FDI Regulatory Restrictiveness Index, selected countries, 2012 67 2.3. OECD FDI Regulatory Restrictiveness Index, Key Service Sectors 67 2.4. GLCs participation in the economy of selected countries 72 4.1. Ease of Döing Business Improvements in Malaysia, 2012-2013.. 131 4.2. PEMUDAH task forces 132 4.3. Fiscal incentives in Malaysia 138 4.4. Skill composition in Malaysia vs regional competitors 149 5.1. Corporate governance reform timeline in Malaysia (1999-2012). 162 5.2. Government Linked Companies in Malaysia 178 6.1. Main Public and Private RBC initiatives in Malaysia 188 6.2. Ranking of dimensions according to RBC Performance in Malaysian PLCs (2007) 190 6.3. Firm level RBC disclosure and practice (sample of 200 companies, 2007) 196 7.1. (A) Composition of domestic financing (% of GDP); (B) Non-performing loans and capital adequacy ratio 210 7.2. (A) Landscape of financial institutions in Malaysia (1996-2011); (B) Commercial banks return on average assets vs. cost to income ratio 212 7.3. (A) Share of total global sukuk market (B) Outstanding sukuk and debt securities 217 7.4. (A) Composition of Domestic Financing (% of total); (B) Corporate and Government Bonds Outstanding 220 7.5. (A) Market capitalisation of listed companies (% of GDP); (B) Stocks traded, turnover ratio 222 7.6. (A) Funds raised by the private sector in the capital market; (B) Financial system assets (2000-2010) 224 8.1. Private investment in Malaysia's infrastructure sectors, 1990-2011 236 8 OECD INVESTMENT POLICY REVIEWS: MALAYSIA 2013 OECD 2013