The Malaysian Foreign Investment Committee (FIC) is a committee and not a statutory body. The guidelines issued by FIC are not issued pursuant to any power granted by legislations. The guidelines are essentially administrative guidelines and do not have the force of law. Notwithstanding,  may foreign investors choose to comply as non-compliance may have practical consequences particularly in respect of any governmental licence, permit or approval for employment of expatriate personnel where most governmental departments in Malaysia choose to conform to the views of the FIC.

Recently, FIC on 1 January 2008 issued fresh guidelines in relation to:

(a) acquisition of  interests, mergers and take-overs by local and foreign interest; and
(b) acquisition of properties by local and foreign interest.

It is noticeable that the guidelines were amended to reflect greater administrative control over foreign investments whether via purchase of properties or of shares of a company. It additionally set outs new transactions where FIC's approval is now required. Particularly, with regard to the acquisition of properties, amongst the transactions which will now be subjected to the guidelines are:

(i) acquisition of a commercial property valued of less than RM10,000,000;
(ii) acquisition of an entire building or an entire property development valued at RM10,000,000;
(iii) acquisition of land or land with building for redevelopment purpose;
(iv) charging of property in Malaysia to foreign banks and financial institutions;
(v) acquisition of property by Real Estate Investment Trust (REIT) management company through private REIT fund;  and
(vi) those transactions which requires approval from any governmental ministries, agencies or statutory or regulatory bodies even if the approval of FIC is not required. 

The FIC has also tighten the time line which a company has to comply with the equity conditions if any is set in its approval letter from 12 months to 6 months.

Notwithstanding, there are few new exemptions which may spur growth in various areas. Those exemptions relate to any acquisition of properties or shares in a company:

(i) operating in the approved area in the Iskandar Regional Development and have been granted the status  by the Iskandar Regional Development Authority;
(ii) which have obtained the endorsement from the Secretariat of the Malaysian International Financial Centre; and
(iii) that have been granted status of International Procurement Centre, Operational Head Quarters, Representative Office, Regional Office and such other special endorsements by the Ministry of Finance, Ministry of International  Trade and Industry; 

Overall, the responses to the amendments had been encouraging, particularly from investors in the Iskandar Regional Development.   

Written by Geraldine Chan

Tay & Partners
6th Floor, Plaza See Hoy Chan,
Jalan Raja Chulan
50200 Kuala Lumpur, Malaysia

Phone: +603-2050 1888
Fax: +603-2031 8618
E-mail: geraldine.chan@taypartners.com.my .
Website: www.taypartners.com.my