New Incentives to Boost Malaysia’s Shipbuilding and Ship Repairing Industry

Malaysia has announced new incentives for the shipbuilding and ship repairing industry.

The Minister of Malaysia’s International Trade and Industry, YB Dato Sri Mustapa Mohamed, says new companies will be able to enjoy either Pioneer Status with 70% of Income Tax Exemption on statutory income for a period of 5 years or Investment Tax Allowance of 60% on the qualifying capital expenditure incurred within 5 years from the date the first qualifying capital expenditure is incurred.

For existing shipbuilding and ship repairing companies, they are now able to enjoy Investment Tax Allowance of 60% on the additional qualifying capital expenditure incurred within a period of 5 years. All applications will be evaluated by the Malaysian Investment Development Authority (MIDA).

Previously, the incentives for shipbuilding and ship repairing were for projects located in the Eastern Corridor, Sabah, Sarawak, Perlis, Kelantan, Terengganu, Pahang and the district of Mersing in Johor.

Companies were eligible for Pioneer Status with income tax exemption of 100% of statutory income for a period of 5 years or Investment Tax Allowance of 100% on qualifying capital expenditure incurred within a period of 5 years. The incentives ended in 2010.

These new incentives are applicable for all areas in Malaysia with the objective to boost the growth of the industry in line with the Malaysian Shipbuilding and Ship Repair Industry Strategic Plan 2020 and the 11th Malaysia Plan.

Promising future

YB Dato Sri Mustapa Mohamed said, “I strongly urge both local and foreign investors to capitalize on these new incentives. Despite the sluggish momentum in the offshore oil and gas industry which have suppressed demand for ships and offshore structures.

“Malaysia has the pull factor to become the leading nation in the shipbuilding and ship repairing industry. The country is the right choice to invest in as it has a promising future based on its strategic location, competitive cost, skilled and talented workforce, advanced infrastructure and extensive trade agreement regionally and globally.”

“We want to encourage the industry players to further build their capabilities and capacities to meet the challenges in the competitive global landscape.

“Local players, especially, should enhance their value add offering by strengthening their innovation capacity in developing new products and production methods. This includes employing local design engineering capability either in-house or outsourcing from the available design house providers,” YB Minister added.

Engine of economic growth

Currently there are 100 registered shipyards in Malaysia, in which 39 are located in West Malaysia and 61 in East Malaysia. In West Malaysia, the main shipyards are located in Lumut (Perak), Port Klang (Selangor), Kemaman (Terengganu) and Pasir Gudang (Johor). In East Malaysia, Sibu (Sarawak) is the main shipbuilding hub with a total of 40 small to medium-sized companies.

There are 6 large shipyards in the country which have repairing capabilities of more than 600 tons displacement namely Malaysia Marine and Heavy Engineering (MMHE), Boustead Naval Shipyard, Sabah Shipyard, Sapura Kencana, Nam Cheong and Muhibbah Marine Engineering.

The shipbuilding and ship repairing industry has been identified as one of the sectors to support the Malaysia economic growth and is expected to generate RM6.35 billion GNI and provide 55,000 jobs by 2020.

Focus areas

Focus areas include production of small vessels for recreation, sports and leisure boats, production of vessels of 30,000 DWT and below for coastal shipping, fabrication of off-shore structures and production of tugs and pusher craft for exports.

Under the 6th Entry-point project (EPP 6) of the Economic Transformation Programme (ETP), the government aims to develop in-country design capabilities for Offshore Support Vessels (OSV) by training up to 160 engineers and technicians in shipbuilding and ship repair through Boustead Heavy Industries Corporation (BHIC) and Boustead Naval Shipyard.

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