by 
11th July 2024
Discover the Benefits of Free Trade Zones (FTZ) in Malaysia
What is a Free Trade Zone (FTZ) in Malaysia and the Benefits
A Free Trade Zone (FTZ) in Malaysia offers numerous benefits, including reduced costs and improved efficiency for businesses. Learn about the advantages of FTZs, Free Industrial Zones, and Free Commercial Zones in this comprehensive guide.
A Free Trade Zone (FTZ) in Malaysia is a designated area where commercial and industrial activities are carried out under the supervision of the Ministry of Finance. FTZs offer local and international companies benefits such as reduced transport and handling costs, time savings, and improved efficiency.
The main function of FTZs is to promote trade by providing simplified and efficient customs procedures. Goods can be brought into an FTZ without being subject to customs duties and excise duties.
Before determining whether you want to set up your company in the Free Trade Zone, you need to know the difference between Free Industrial Zone (FIZ) and Free Commercial Zone (FCZ).
Normally, manufacturing activities occur in the Free Industrial Zones (FIZs) and trading activities in the Free Commercial Zones (FCZs).
What is a Free Industrial Zone?
A Free Industrial Zone is a special economic zone where businesses manufacture goods for export. If your company wishes to set up a free industrial zone in Malaysia, it must export at least 80% of its outputs and raw materials. With special approval from the Ministry of International Trade and Industry (MITI), this export requirement can be reduced to 60%.
Benefits of Setting Up a Free Industrial Zone
There are two key benefits of setting up your company in a Free Industrial Zone. Firstly, your company can enjoy duty-free imports of specific raw materials and equipment. Secondly, your company can enjoy exemptions from sales tax, excise tax, and GST. Note that machinery and raw materials not directly used in the manufacturing process do not qualify for tax exemptions.
List of Free Industrial Zones
Bayan Lepas Free Industrial Zone:
Located in Penang, this zone is known as the island’s main industrial hub, famous for its technology and high-tech manufacturing firms. Known as the “Silicon Valley of the East,” it also provides a skilled and semi-skilled labor force. Some well-know companies like Osram Opto Semiconductors, Bosch, Formosa Engineering, Inter-Quartz, AKN, Tonlek Manufacturing, Northen Telecom, Penshin Components, Eu Engineering, Clarion, Benchmark Electronic, Syarikat Granek and Amphenol. Companies in phase 2 include Dynacraft, Fairchild, Towam, Spansion, Aesculap Surgical Industries, Lemtronics, Renesas, Plexus and B. Braun. For phase 3, there are more companies ranging from high tech to light industry, such as Intel, Radiola Corporation, Cristal Precision, Clarion, ITW Meritex, Okuni Seiko, GUH Holding, Malaysia Engineering Plastic, Applied Magnetic, Mapa, Sanyo, Pently, Tan Brothers, Shina, OE Design, Lumileds Lighting, Western Digital, Fastron, Advanced Micro Devices, Iso Technology, KESP, Avago Technology, Agilent Technologies and Woodard Textile Mills. Some well-known companies in phase 4 include Globetronics, Dufu Industries, Dell Inc, Intel, Vitrox and Motorola.
Pasir Gudang Free Industrial Zone:
Situated in Johor, companies here focus on transportation, logistics, shipbuilding, petrochemicals, and other heavy industries.Some well-known companies that establish their presence here are Sime Darby Oils Pasir Gudang Refinery, Pantech Stainless & Alloy Industries Sdn Bhd, Pride-Chem Industries Sdn Bhd and Amtech Sdn Bhd.
Port Klang Free Zone:
This zone serves both industrial and commercial purposes, offering state-of-the-art facilities for international cargo distribution and consolidation.Some well-known companies such as Baerlocher, GE Power Solution, Aker Solution, Gyrodata International, Schlumberger, Cargill, Petikemas, Orientage, Ohreco and DRB-HICOM Auto Solutions.
Advantages of Malaysia Free Trade Zones
Facilitation of Transport Activities:
Located near ports, airports, and expressways, FTZs make the transportation of goods and raw materials easier, benefiting businesses with efficient logistics.
Provision of Support Infrastructure:
FTZs offer integrated transport and communication networks, supporting business activities within the zones. This includes warehousing, transportation, and freight forwarding services.
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