Ministry of International Trade and Industry of Malaysia introduced tax perks for shipbuilding and ship repair yards, trying to stimulate the economy and to make local businesses more competitive on the Asian market. Malaysian Ministry offered new companies to apply for pioneer status, which gives 70% of income tax exemption on statutory income for five years or investment tax allowance of 60% on the first qualifying capital expenditure incurred within five years. According to the Ministry of International Trade and Industry, this should stimulate creating of the shipyards and restructuring of the currently troubled ones.
Existing shipbuilding and ship repair companies will be given an investment tax allowance of 60% on the additional qualifying capex incurred within a period of five years. All applications will be evaluated by the Malaysian Investment Development Authority.
The new incentives are applicable to all areas in Malaysia, with the objective of boosting the overall growth of the industry in line with the Malaysian Shipbuilding and Ship Repair Industry Strategic Plan 2020 and the 11th Malaysia Plan.
Malaysia has about 100 shipyards, but only 6 of them are large and have capacity of more than 600 tonnes. The country shipbuilders are focused in offshore-related construction, but sector is in serious delay during the last months following the low oil prices and freezing offshore oil sector. The country is highly depending from the shipping industry and want to stimulate foreign investors and local companies to invest in heavy industries business.
Malaysia is facing great competition with the neighbours in Indonesia, Singapore, Vietnam and the Philippines, which all have significant yard facilities and also offer tax allowance for the shipbuilders.