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The objective of the
Industrial Co-ordination Act 1975 (ICA) is to ensure orderly development
and growth in the manufacturing sector. The ICA requires person(s)
engaging in any manufacturing activity to obtain a licence from the
Licensing Officer in respect of such manufacturing activity.
Only
manufacturing companies with shareholders’ funds of RM2.5 million and
above or engaging 75 or more full-time employees need to apply for a
licence under the ICA.
All applications for manufacturing
licences should be made in the prescribed form to the Director-General
of the Malaysian Industrial Development Authority (MIDA) in Kuala
Lumpur, Malaysia.
MIDA, is the Government’s principal agency for the
promotion and coordination of industrial development in Malaysia.
The relevant definitions in the ICA are
as follows:
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The “Licensing Officer” is the
Secretary-General of the Ministry
of International Trade and Industry (MITI).
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“Manufacturing activity” means
the making, altering, blending, ornamenting, finishing or otherwise
treating or adapting any article or substance with a view to its
use, sale, transport, delivery or disposal and includes the assembly
of parts and ship repairing but shall not include any activity
normally associated with retail or wholesale trade.
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“Shareholders’ funds” means
the aggregate amount of a company’s paid-up capital (in respect of
preference shares and ordinary shares and not including any amount
in respect of bonus shares to the extent they were issued out of
capital reserve created by revaluation of fixed assets), reserves
(other than any capital reserve which was created by revaluation of
fixed assets and provisions for depreciation, renewals or
replacements and diminution in value of assets), balance of share
premium account (not including any amount credited therein at the
instance of issuing bonus shares at premium out of capital reserve
by revaluation of fixed assets) and balance of profit and loss
appropriation account.
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“Full-time paid employees” means
all persons normally working in the establishment for at least six
hours a day and at least 20 days a month for 12 months during the
year and who receive a salary. Persons such as travelling sales,
engineering, maintenance and repair personnel, or who are paid by
and are under the control of the establishment, are also included.
Full-time paid employees also include directors of incorporated
enterprises except those paid solely for the attendance at Board of
Directors meetings. Family workers who receive regular salaries or
allowances and who contribute to the Employees Provident Fund (EPF)
or other superannuation funds are also included in the definition.
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Malaysia’s rapid
industrial growth over the past decade has created a high demand for
labour in the manufacturing sector. The last few years has seen a
tightening in the labour market situation.
In view of this, the Government has set
down guidelines for the consideration of industrial projects based on
the Capital Investment Per Employee (C/E) Ratio.
Projects with a
C/E Ratio of less than RM55,000 is defined as labour-intensive and will
not be considered for a manufacturing licence or for tax incentives by
MITI.
However, projects which fulfil one of
the following criteria will be exempted from the above guideline:
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If value-added is more than 30%.
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If the Managerial, Technical and
Supervisory (MTS) Index is more than 15%.
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If the project undertakes activities
or products listed as promoted activities and products of high
technology.
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If the project is located in the
Eastern Corridor* of Peninsular Malaysia, Sabah and Sarawak.
* The Eastern Corridor of Peninsular
Malaysia covers Kelantan, Terengganu, Pahang and the district of Mersing
in Johor. |
