Malaysia’s biotechnology thrust began as early as in 1995, when the National Biotechnology Directorate was formed under the purview of the Ministry of Science, Technology and Innovation.
Back then, biotechnology was still in its infancy in Malaysia and not much consideration has been given to it.
First the National Biotechnology Policy was tabled in mid-2005, the National Biotechnology Division was established, and the Malaysia Biotechnology Corporation was then founded in May 2005, followed by BioNexus Malaysia in 2006.
The biotechnology sector’s contribution is expected to be approximately 2.5 % by 2010, 4.0% by 2015 and 5.0% by 2020.
One of the biotechnology projects approved under the public-private partnership is the provision of infrastructure to develop a biotechnology cluster located within Iskandar Malaysia – Biotechnological Park Bio-XCell.
Bio-XCell is a three-phase project, stretched across six years.
The development features green initiatives such as natural lighting, passive cooling, solar energy and rain water harvesting which translates into cost savings and efficient operations for its prestige tenants.
Bio-XCell is part of Nusajaya, a 24,000-acre development located in Iskandar Malaysia, at the south-western tip of Peninsular Malaysia, in the resource-rich state of Johor.
The ecosystem at Bio-XCell is designed as a platform for healthcare biotechnology and caters for the optimization of industrial biotechnology, with a focus on manufacturing and R&D.
The manufacturing focus of healthcare biotechnology includes processes in the entire manufacturing cycle.
Bio-XCell will be the ideal platform for companies involved in biocatalysts, enzymes, biopharmaceuticals, Active Pharmaceutical Ingredients (APIs), vaccines, formulation and fill & finish.
In industrial biotechnology, manufacturing focus will be on the conversion of biomass into industrial sugars, production of industrial enzymes and plasticizers, conversion of oleo-chemicals into various products or raw materials and feedstock for the production of industrial and consumer goods.
The R&D cluster and facilities within Bio-XCell will cater for Contract and Clinical Research Organisations (CROs).
The Malaysian government has graciously granted certain incentives for those who are willing to set up their business in the new developing region of Iskandar Malaysia before end of 2015.
However, Iskandar Malaysia is not meant for all types of industries. Only certain approved industries are given the incentives.
There are two categories of recipients:
a) Companies operating in designated approved areas in Iskandar Malaysia and
b) Companies operating in Iskandar Malaysia and had obtained MSC Bionexus Status (BioNexus is a special status awarded to qualified international and Malaysian biotechnology companies).
Companies without MSC Bionexus Status will enjoy:
• Ten year tax exemption on statutory income from qualifying activities within an approved node
• IDR status companies must commence their activities before December 31, 2015
• Unabsorbed loses can be carried forward to after December 31, 2015
• Exemption from withholding tax on royalty and technical fee payments to non-residents for a period of 10 years from commencement of operations.
• Exemption from the Foreign Investment Committee rules; freedom to source for capital and employees.
• Foreign knowledge workers in IDR will be able to import or purchase a duty free car for their personal use.
• Knowledge workers working in Iskandar Malaysia Region will only have to pay a maximum of 20% income tax.
A company with MSC BioNexus Status is eligible for the following incentives:
Companies with MSC Bionexus Status will get to enjoy benefits like the above as well as those enumerated below.
In addition, an MSC Bionexus Status company may chose to start operation even after end of 2015 and still enjoy incentives.
Therefore, companies are encouraged to obtain MSC Bionexus Status as they will be treated differently and on a higher level.
a. An exemption from tax on 100% statutory income:
• for a period of ten (10) consecutive years of assessment from the first year the company derived statutory income from the new business; or
• for a period of five (5) consecutive years of assessment from the first year the company derived statutory income from the existing business and expansion project; or
b. An exemption of 100% statutory income derived from a new business or an expansion project that is equivalent to an allowance of 100% of qualifying capital expenditure incurred for a period of five (5) years.
c. A BioNexus Status company is entitled to a concessionary tax rate of 20% on statutory income from qualifying activities for ten (10) years upon the expiry of the tax exemption period
d. Tax exemption on dividends distributed by a BioNexus Status company;
e. Exemption of import duty and sales tax on raw materials/components and machinery and equipment;
f. Double deduction on expenditure incurred for R&D; and
g. Double deduction on expenditure incurred for the promotion of exports;
h. With effect from 2 September 2006, buildings used solely for the purpose of biotechnology activities will be eligible for Industrial Building Allowance to be claimed over a period of ten years.
Incentives for Investment in a BioNexus Status Company :
(i) Investment by a Company or Individual in a BioNexus Status Company**
A company or an individual (that carry on business) investing in a BioNexus Status company** is eligible for a tax deduction equivalent to the total investment made in seed capital and early stage financing.
(ii) Tax Incentives for Mergers and Acquisitions with a Biotechnology Company
A BioNexus status company** undertaking merger and acquisition with a biotechnology company is eligible for exemption of stamp duty and real property gain tax within a period of five years until 31 December 2011.
The Malaysian Government has shown that it is forward-thinking when it identified biotechnology as a catalyst for the nation’s future economic growth and development.
The initiatives that have been put in place yet to yield much fruits but progress has certainly been made.
With the added support of the private and public sector and foreign investments, Malaysia is in a prime position to become a significant contributor to the global biotechnology value change in the years to come.
Source : Bio-xcell, Patent Agent Tip and Technology Business Review, May, 2009
(this article written for 1BINA.my)