Game-Changer

Theresa Chong highlights the salient changes under the Malaysian Industrial Development Authority (Amendment) Bill 2011

 

BACKGROUND

The Malaysian Industrial Development Authority ("MIDA") was incorporated under the Malaysian Industrial Development Authority Act 1965 ("the Act") which came into force on 23 June 1966. The Act charged MIDA with the responsibility for promoting and coordinating industrial development in Malaysia.

Since its incorporation more than 4 decades ago, MIDA has played a pivotal role in transforming the Malaysian economy from one which was based on exports of primary commodities like rubber, palm oil and tin to one where the manufacturing sector now accounts for 26.6% of the Gross Domestic Product and 77.3% of the gross exports of the country (Economic Report 2010/2011).

On 30 March 2010, the Prime Minister of Malaysia, Datuk Seri Mohd Najib Tun Razak, announced at the launch of the New Economic Model that MIDA would be changing its name to the Malaysian Investment Development Authority and that it would be the principal Government agency to promote and facilitate investments in the manufacturing and services sectors, excluding utilities and financial services (The Star Online, 30 March 2010).

More than a year after that announcement, the Malaysian Industrial Development Authority (Amendment) Bill 2011 ("Bill") was passed by the Dewan Rakyat of the Malaysian Parliament on 15 June 2011 (Hansard, 15 June 2011).

The Prime Minister of Malaysia has also announced that the proposed amendments under the Bill will come into force in July 2011 (Bernama, 12 April 2011).

This article highlights the main amendments to be made to the Act pursuant to the Bill. References in this article to a 'Clause' are references to a Clause of the Bill.

 

CHANGE OF NAME

Upon the amendments coming into force, the name of the Act will be changed to "Malaysian Investment Development Authority (Incorporation) Act 1965" (Clause 3).

At the same time, MIDA's name will also be changed to the "Malaysian Investment Development Authority" (Clause 4(a)).

 

POWERS AND FUNCTIONS OF MIDA

In addition to its existing responsibility for promoting industrial development and related services, Clause 8 of the Bill expands the functions of MIDA to include the promotion of investments in the services sector (excluding the financial and utilities sectors). It should be noted that the Bill does not define "services" or "services sector".

Clause 12 of the Bill introduces a new Section 7C to the Act. This new provision confers powers on MIDA to incorporate companies under the Companies Act 1965 to carry out and have the charge, conduct and management of any project, scheme or enterprise planned or undertaken by MIDA in the performance of its functions or the exercise of its powers.

Unlike Section 33 of the Agensi Inovasi Malaysia Act 2010 which expressly permits the Agensi Inovasi Malaysia to incorporate companies under the Companies Act 1965 and to enter into joint ventures and other forms of co-operation with any other person, the proposed new Section 7C and the Act are silent as to whether MIDA is permitted to enter into such arrangements. In the absence of such express authority, it is doubtful that MIDA can invite other persons or entities to participate as shareholders in the companies which are incorporated by MIDA.

 

THE CHIEF EXECUTIVE OFFICER

The designation of the principal officer of MIDA is to be changed from 'Director General' to "Chief Executive Officer" ("CEO") (Clause 6). The CEO will be the Director General of the MIDA (Clause 7(b)).

In addition to the responsibilities set out in Section 3D(2) of the Act, the CEO will be responsible for managing the annual budget of MIDA and making decisions on the allocation for all activities, including development and operational expenditure (Clause 7(c)(iii)).

 

USE OF THE FUND

The Act established a fund, the Malaysian Industrial Development Fund ("the Fund"), which is to be used for the purposes of defraying all expenses incurred by MIDA in carrying out its functions under the Act.

In line with the change of name of the Act, the Fund will be renamed the "Malaysian Investment Development Fund" (Clause 13). The purposes for which the Fund may be utilized will be expanded to include:

 

  1. providing loans or any financial assistance to members of the private sector for purposes approved by the Minister (Clause 14(a)); and

  2. providing financial assistance or credit facilities, with or without interest, or any contribution to any person for educational purposes, scholarships or any other purposes subject to the approval of the Minister (Clause 14(b)).

 

 

Although the powers to grant loans and provide financial assistance to the private sector may enable MIDA to play an even more dynamic role in the development of the Malaysian economy, it is imperative that MIDA establishes proper governance procedures to prevent these powers from being abused.

 

THE OIL AND GAS SECTOR

The Bill had barely begun its passage through the Malaysian Parliament when it was reported that the Malaysian Government would soon establish the Malaysian Petroleum Resource Corporation ("MPRC") to spur the development of the oil and gas sector. It was further reported that the MPRC would come under the auspices of MIDA (StarBiz, 14 April 2011).

 

CONCLUSION

The proposed amendments will significantly expand the role of MIDA in the development of the Malaysian economy by extending its powers and responsibilities to include the promotion of investments in the services sector (excluding the financial and utilities sectors).

As can be seen from the Economic Report 2010/2011, MIDA has a proud and successful record of promoting industrial development in Malaysia. It is hoped that MIDA will be equally, if not more, successful in the development of the services sector in Malaysia.

The proposed amendments are more than a mere rebranding exercise. They are in fact a game-changer in Malaysia's quest to attract more foreign investments in an increasingly competitive global environment.

 

THERESA CHONG ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 

Editor’s note: The Malaysian Industrial Development Authority (Amendment) Bill 2011 has been passed by the Senate on the 5th July 2011. It still requires Royal Assent and publication in the Gazette to become law.

 

 

 
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