The Industrial Co-Ordination Act
The Industrial Co-Ordination Act (“Act”) was enacted in 1975 by the Government to ensure orderly growth for the co-ordination and orderly development of manufacturing activities in Malaysia.
Regulators
The ministry charged with the responsibility of administering the manufacturing sector is the Ministry of Investment, Trade and Industry (MITI).
Under MITI is the Malaysian Investment Development Authority (MIDA), the agency that handles the approval and licensing of manufacturing activities regulated by the Act.
Definition of Manufacturer and Manufacturing Activity
The Act defines “Manufacturer” as a person who is “engaged in any manufacturing activity”. On the other hand, “Manufacturing” under the Act is defined as the “making, altering, blending, ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal and includes the assembly of parts and ship repairing but shall not include any activity normally associated with retail or wholesale trade”.
Manufacturing License Requirement
Section 3 (1)
(1) No person shall engage in any manufacturing activity unless he is issued a licence in respect of such manufacturing activity.
Eligibility Criteria
The threshold for such license mentioned in Section 3(1) of the Act is set out in the Guideline on Application for Manufacturing License (ML) (“Guidelines”) from MIDA stating that manufacturing license are compulsory for any company engaged in any manufacturing activity:
(i) Shareholders’ funds of Ringgit Malaysia Two Million and Five Hundred Thousand (RM 2,500,000.00) and above or employing 75 or more paid employees working full time;
(ii) Project’s Capital Investment Per Employee (CIPE) of at least Ringgit Malaysia One Hundred and Forty Thousand (RM140,000.00);
(iii) The applicant company comprising of at least eighty percent (80%) Malaysians working full-time;
(iv) The applicant company having at least twenty five (25%) full time work force which are managerial, technical and supervisory (MTS) staff with a degree, diploma/certification or products value added at least by forty percent (40%); and
(v) The applicant company’s project must be consistent with the national economic and social objectives and promotes and orderly development of manufacturing activities in Malaysia.
The Guidelines provide a detailed and thorough definition, computation and/or formula of the eligibility criteria mentioned above.
Transferability
The manufacturing license is not transferable without the prior approval of the regulator.
Application of Manufacturing License
According to MIDA, the application for a manufacturing license is now deliberated through the self-assessment and self-declaration mechanism under the MIDA online application portal at https://investmalaysia.mida.gov.my.
As per Section 4(2) of the Act “one application may be made for one or more products manufactured in one or more places of manufacturing activity but a separate licence shall be issued for each place of manufacturing activity”.
Exemption
Section 11 of the Act provides that “the Minister may by order exempt any manufacturing activity from all or any of the provisions of this Act”.
Revoking of License
Section 6(1) explains that an officer may revoke the license of a manufacturing company where the company:
(i) has not complied with any condition imposed in the licence;
(ii) is no longer engaged in the manufacturing activity in respect of which the licence is issued; or
(iii) has made a false statement in his application for the licence.
Revocation of license requires a manufacturer to cease operations. Where a manufacturing company has been revoked of a license by an officer, such officer may call on the manufacturer to show cause why such license should not be revoked. Where the officer decides to revoke the license of the manufacturer, such manufacturer may appeal to the Minister within forty-five (45) days in accordance with Section 13 of the Act.
Compliance with the Act is compulsory for any company engaging in manufacturing activities that meet the abovementioned threshold. Any company that does not meet the eligibility criteria shall be exempted to apply for a manufacturing license.
Yasmin Harizal
Associate (Corporate & Commercial) | NSA Legal
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