With the launch of the Tenth Malaysia Plan (10MP), the Government’s targeted growth of separate regions in the country builds a progressive and sustainable nation, including Sarawak. The Sarawak Corridor of Renewable Energy (SCORE) is one of the five development corridors that is poised to be the major catalyst of growth and development in the central region of Sarawak. We take a look at the investors and tax breaks available in the area.
Launched in February 2008, SCORE is poised to create 1.6 million new jobs, double the population of Sarawak, achieve a gross domestic product (GDP) per capita growth of 7 % per annum by 2030. SCORE covers approximately 320km, from Tanjung Manis to Similajau, and covers an area of 70,709 sq km. The major towns within the corridor are Sibu, Bintulu, Mukah, Sarikei and Kapit.
The implementation of the SCORE initiative is spearheaded by the Regional Economic Development Authority (RECODA). RECODA’s primary responsibility is to promote and attract investment, and ensure that projects are successfully implemented. Its function also includes mobilising Sarawak’s natural resources to facilitate SCORE’s development and provide investor support.
Ten priority industries which will have the highest economic impact on Sarawak have also been identified. These are: aluminium, glass, steel, oil-based, palm oil, fishing and aquaculture, livestock, timber-based, marine engineering and tourism industries. These industries are given priority in market planning, investment promotion and development.
SCORE-ing With Investors
SCORE’s five-prong development strategy has been well received with a total of approximately RM32 billion of approved investments to date including:
Besides the above, other foreign investors have also expressed interest to invest in SCORE. One of the more recent ones is China Dalian International Economic & Technical Cooperation Group Co Ltd in the oil and gas related industry.
The key attraction for companies investing in SCORE is the competitively priced (and abundant) energy resources being produced in Sarawak, specifically hydropower, coal and natural gas. Sarawak has the potential to produce 28,000 megawatts of hydroelectric energy by 2030 from its mighty rivers: the Batang Ai, Bakun, Murum, Pelagus Baleh and Limbang.
To support the investments in SCORE, other infrastructure upgrades and projects being planned for Sarawak include:
• the building of a new port (the RM1.8 billion Samalaju deepsea port)
• expanding the reach of road networks, and
• building of a rail link - the first ever in the state.
All these will increase SCORE’s attractiveness to investors and bring major economic spin-offs to the state. The government has allocated some RM67 billion to develop the basic infrastructure needed for SCORE.
So far, companies in energy intensive industries have been the first to jump at the opportunity to invest in SCORE. However, companies with interests in other industries especially those which fall within the ten priority industries are expected to follow suit.
Adding to the SCORE Card
Besides the competitively priced energy, various tax incentives are offered to attract investors to SCORE. These incentives range from tax holiday or income tax exemption to investment allowances on capital expenditure incurred. Examples of the key tax incentives are set out beside:
* This is in addition to the normal capital allowances.
At an allowance rate of 100%, the investment tax allowance incentive is very attractive especially for heavy industries that SCORE is luring which are highly capital intensive.
Article contributed by Phan Wai Kuan, an Executive Director with Pricewaterhouse Coopers Taxation Services Sdn Bhd. She has over 20 years’ experience in taxation matters in New Zealand, Australia and Malaysia. Her experience in Malaysia includes advising clients on direct tax matters in the financial services, property development, manufacturing sectors as well as cross border investments. She can be contacted at firstname.lastname@example.org.