disciplines. Companies engaged in this program are offered a double tax deduction incentive for the expenses incurred on the interns75 (MPRC 2012). In line with the first program, the second program uses a similar structure while focusing on fresh graduate talents with less than two years of work experience. Table 5.6 Companies and Universities Engaged in the Malaysian Government’s Internship Program Companies Universities MMC Oil and Gas Engineering Kebangsaan Malaysia Aker Engineering Malaysia Sains Malaysia Perunding Ranhill Worley Putra Malaysia Technip Geoproduction Malaya RNZ Integrated Teknologi Malaysia Source: Based on data from MPRC 2012.
In relation to labor laws affecting the employment of expatriates by OFSE suppliers, we note that Malaysian company law links the size of paid-up capital to the number and type of expatriate work visas that may be requested and obtained by a company (DoS 2012). Domestic Sourcing of Goods and Services Traditionally, Petronas has been the main driver for the domestic sourcing agenda in the Malaysian oil and gas sector. Petronas requires PS contractors to domestically source all goods and services incidental to upstream activities or source them directly from the manufacturer if not locally available. Procurement from foreign countries requires the approval of Petronas (Nordas, Vante, and Heum 2003). As per the NOC’s procurement process, suppliers of OFSE must receive a license from Petronas to be considered. Foreign suppliers can obtain the license in case they partner with local firms or act as contractors. If incorporated locally,76 foreign suppliers are restricted to a 30 percent equity stake (DoS 2011).77 On another front, and to encourage the engagement of local supplier in oil and gas activities, Petronas has been holding a touring “clinic” initiative. The clinic offers a platform for local suppliers to interact with Petronas staff—local suppliers learn about the online procurement system of the NOC as they get help in registering and accessing future opportunities. These include opportunities associated with the international activities of Petronas. Incentives for the Manufacturing Sector The Malaysian government, through the Malaysian Investment Development Authority (MIDA), extends a set of fiscal incentives for companies investing in the domestic manufacturing sector. These incentives derive from the Income Tax Act and Customs Act of 1967, Sales Tax Act of 1972, Excise Act of 1976, Promotion of Investments Act of 1986, and Free Zones Act of 1990 (MIDA 2012). The major incentives include the Pioneer Status and Investment Tax Allowance (ITA) that are extended based on the level of value-added, technology sophistication, industrial links, and other parameters. A Pioneer Status enables the company to enjoy partial exemptions from income tax over five years; tax is applied on 30 percent of statutory income.78 In addition, companies can carry forward any unabsorbed capital allowances and accumulated losses incurred during the pioneer period. Alternative to the Pioneer Status, companies can qualify for ITA. Under ITA, a company is extended an allowance of 60 percent on its qualifying
For details visit http://sip.talentcorp.com.my/about.php. Such a restriction applies to other sectors such as legal services, engineering services, taxation and accounting services, professional services, telecommunications, advertising, financial and insurance services, and banking services (DoS 2011). 77 Shipping activities are restricted to Malaysian registered vessels. Foreigners are permitted to hold a 70 percent stake in shipping and logistics companies and 49 percent in forwarding agencies. The limitation also applies to vessels that support oil and gas operations. 78 After deducting revenue expenditure and capital allowances from the gross income (MIDA 2012). 75 76
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